It’s been 17 months since Anthem announced it would buy Cigna for $48.4 billion. With the recent start of the Anthem-Cigna merger trial, we’ll all soon know if they can legally seal the deal.
Throughout the two-part hearing, the U.S. Department of Justice, Anthem, and Cigna will argue over the merger’s effect on the national market and then it’s effect on local markets. U.S. District Judge Amy Berman Jackson will then rule on whether the merger can go through.
Together, Anthem and Cigna would create the biggest U.S. insurer by membership, covering more than 50 million lives.
What’s Happened So Far
The DOJ claims that the Anthem-Cigna merger would hurt the national market. It says national and regional employers will have limited health insurance options if the merger closes. It further argues the merger would cause market competition and innovation to suffer and rates to increase.
Anthem maintains that large employers have many regional health insurance choices, and the merger would allow it to offer better rates. It also states the merger would allow it to better compete against other major insures, such as UnitedHealth Group, Inc. and Aetna, Inc., as well as other Blue Cross Blue Shield (BCBS) Association insurers in non-Anthem areas.
The DOJ questions if Anthem would truly use Cigna to vie against other Blues for business. It provided documents showing Anthem has previously helped BCBS Association insurers get more business in these non-Anthem areas. Additionally, both parties made comments about Anthem and Cigna’s rocky relationship.
Throughout their courtship, both insurers have charged each other with breaking their deal’s terms. During the trial, unsealed testimony also revealed that Anthem has been working on integration plans without Cigna, because Cigna had stopped working them due to feeling like the plans would harm their network and value. Anthem lawyer Christopher Curan insisted their disagreements over the combined company’s governance “should not impede their ability to integrate.”
What’s Still to Come
Talk about the Anthem-Cigna deal’s effect on the national market should wrap up soon, and then the conversation will move onto its effect on local markets.
The Anthem-Cigna trial will continue through December. Jackson stated she hopes to rule by the end of January.
If the merger falls through, Anthem will have to pay a $1.85 billion parting fee to Cigna. However, if the merger comes to pass, Anthem could face up to a $3 billion fine from the national BCBS Association.
Per BCBS Association’s rules, Anthem must obtain two-thirds of its nationwide revenue from Blue-branded products. In order for the company to remain in compliance with this rule, Anthem would have to rebrand 23 percent of Cigna’s domestic revenue, according to Anthem Vice President for Corporate Development Steve Schlegel.
The combined company would have 120 days to submit a plan on how they would resume their compliance with the rule. One possible way to return to compliance would be to rebrand Cigna as Anthem in each of the 14 states where Anthem’s the only Blue, though Schlegel insisted that isn’t the plan.