The stakes are high as the Department of Justice's antitrust case against Anthem (ANTM) and Cigna (CI)'s $54 billion merger gets underway Monday in a Washington, DC federal district court.
For the Obama administration, the trial marks a final push to leave a lasting impact on the nation's health care market in the first of the two insurer antitrust cases to go to trial. Last July, the administration also filed to block Aetna (AET)'s $43 billion merger with Humana (HUM). That trial is set to begin next month.
For Anthem, the trial is a last ditch effort to salvage its 16-month old deal with Cigna, which has been contentious from the start, and to avoid paying a $1.85 billion break-up fee.
The key issue in the case centres on the impact of the merger on the national employer market. The two companies combined would become the largest U.S. insurer by membership, covering more than 50 million people.
The government argues the deal would harm large employers by reducing the number of large health insurers with a national footprint from 5 to 4. Yet, legal experts say healthcare antitrust cases usually focus on competition in local markets.
"There really is not a well-defined market for national employers, and there hasn't been a case yet brought by the justice department that alleged such a market," said Professor Tim Greaney, Co-Director, Center for Health Law Studies at Saint Louis University School of Law. "Even some of the largest employers are not everywhere."
The DOJ maintains that the insurers compete head to head for national account in nearly three-dozen local markets.
"You're going to see the DOJ have examples of customers who … in 35 markets the only two choices they have are Anthem and Cigna," said Andrea Murino, partner and co-chair of the antitrust and competition practice at Goodwin in Washington, DC. "You think about what kind of choice those customers will have going from two entities to one entity in a post-merged world, and that doesn't look so good for Anthem and Cigna."
The insurers have argued that their combined company will be able to cut overhead costs, and have the scale to negotiate better pricing from hospitals and physician groups, which will benefit consumers and companies with lower prices.
However, the government maintains the contentious relationship between Anthem and Cigna bodes poorly for their ability to integrate the two firms successfully.
DOJ attorneys plan to call Anthem CEO Joseph Swedish as their first witness, and will likely confront the insurance executive with email exchanges citing the firms' fierce competition.