On November 21, 2016, the U.S. District Court for the District of Columbia heard opening arguments in the Department of Justice’s lawsuit challenging the proposed merger between Anthem, Inc. and Cigna Corporation.  This is the first time that the Department of Justice (DOJ) has sought to block a health insurance merger, emphasizing that the DOJ continues to increase scrutiny on the healthcare industry.

The trial will be bifurcated, with the first phase focusing on competition for national accounts of the country’s largest employers.  If there is not a finding of substantial harm to competition in the first phase, the trial will enter a second phase to examine potential harm to large employers in local markets.  The second phase also will evaluate Anthem and Cigna’s combined power to pay less money to doctors and hospitals.

Anthem currently covers 40 million Americans while Cigna covers 13 million.  Anthem’s proposed purchase of Cigna for $54 billion would make it the largest health insurer in the nation. In opening arguments, the DOJ claimed the merger would reduce competition among national insurers for large companies’ accounts and force providers to accept Anthem’s lower reimbursement rates.  

Anthem and Cigna argued that large companies prefer to use a mix of national and regional insurers, so a reduction in the number of national insurers would not have the negative impact on consumers that the DOJ is alleging.  In addition, Anthem and Cigna focused on the insurance industry’s move toward value-based reimbursement.  They argued that looking solely at lower reimbursement rates fails to consider other incentive payments that may be made.

The case is United States et al. v. Anthem, Inc. et al., Case No. 1:16-cv-01493.  Additional information regarding the DOJ’s challenge is available in King & Spalding’s Client Alert here.  The DOJ has also challenged the proposed merger between Aetna and Humana  That trial is set to begin on December 5, 2016.