Anthem and the U.S. Justice Department dug in their heels on Monday in court over whether the lower prices the health insurer expects to negotiate after buying smaller rival Cigna are an efficiency that benefits customers or an antitrust violation.
In the first phase of what could be a two-stage trial, a lawyer for Anthem argued that the $45-billion deal, which was announced more than a year ago, would create a new, bigger insurer with the power to push down prices that it would pass onto customers.
But the Justice Department argued that any cost cuts would come from Anthem using its clout in the market to force hospitals and doctors to work for less.
“Efficiencies don’t count if the only way you get them is more market power,” the Justice Department’s Jon Jacobs said in opening statements.
Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia may opt to block the proposed deal if she decides it will mean higher prices for consumers or that it hurts suppliers. The Justice Department asked her to declare the deal illegal under antitrust law.
The Justice Department’s Jacobs argued that the deal would also lead to fewer companies selling health insurance to big, nationwide employers that need a broad network of services.
Fewer companies usually means higher prices for these big companies, and Anthem‘s lawyer Christopher Curran took issue with that idea. “The notion that these Fortune 500 companies are going to be victimized here … is not realistic,” Curran said in court.
Curran also argued that the Justice Department had failed to consider the new online private exchanges where corporations allow employees to choose from multiple insurers.
Judge Jackson noted that the major insurance companies were the ones in the exchanges and asked: “How’s that the answer to the problem?”
The Justice Department’s Jacobs noted the tough competition between the companies, referring to an Anthem document. “It offered its sales force a bounty if they took business away from Aetna or Cigna,” said Jacobs.
The trial is expected to end by the end of the year.
The Justice Department filed lawsuits on July 21 asking a federal court to stop the $45-billion purchase of Cigna and Aetna’s $33-billion planned acquisition of Humana.
Anthem shares were up 1.4% at $137.33 and Cigna shares dipped 0.7% to $13.74