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Rift Between Anthem and Cigna CEOs Casts Doubts on Merger

News  |  By Gregory A. Freeman  
   December 07, 2016

As the first part of the antitrust trial involving the proposed merger of Anthem and Cigna comes to a close, information about how an implementation plan for the payers was executed has come to light.

Early information from the Department of Justice lawsuit aimed at blocking Anthem's attempt to buy Cigna for $48 billion makes clear that even as the two insurance giants try to become one, they are not the best of friends.

DOJ prosecutors and the judge have questioned whether that rift will threaten the merger and ultimately harm consumers.

Unsealed transcripts obtained by The Wall Street Journal last month revealed details about the continuing antagonism between Anthem and Cigna's top executives. The trial continues in front of Judge Amy Berman Jackson in the U.S. District Court in Washington, DC.

Cigna CEO David Cordani confirmed to the court that Cigna had stopped participating in some merger activities, saying he worried that Anthem's integration strategy could damage Cigna's network and value, the Journal reported.

Anthem CEO Joseph Swedish testified that when Cigna stopped cooperating with the merger plan, Anthem created a confidential team to complete the task without Cigna's knowledge, according to the documents.

When questioning Swedish, DOJ attorneys cited a December 2015 note from Swedish to Cordani, in which he said the execution of their integration plans had been "unacceptable."

A Question of Integration
DOJ attorneys expressed concern that the rift could cause the merger to fall apart even if the court allowed the plans to proceed, and that such a failure could harm both companies' customers. That prompted the judge to question the insurers' promises of a smooth consolidation. "How do you work on integration without talking to the person you're integrating with?" Jackson asked.

Swedish also testified that pressure from Cigna's board resulted in Anthem expanding Cordani's planned role in the combined company, but he added that there was some question as to whether Cordani would remain after the merger.

In testimony last week, an Anthem executive said the insurer "could face a penalty of about $3 billion from the national Blue Cross Blue Shield Association if it fails to derive the bulk of its nationwide revenue from Blue-branded products after acquiring Cigna," reported Bloomberg News.

The Other Big Deal in Question
As DOJ's other big antitrust lawsuit gets underway, attempting to block Aetna's $37 billion purchase of Humana, court documents suggest that Aetna's decision to pull much of its business out of Obamacare could be an issue.

DOJ filed suit in July to block the huge merger on antitrust grounds, saying that it would drastically reduce competition and create Medicare Advantage monopolies in some areas. Consumer prices for healthcare insurance also would increase in many communities, DOJ lawyers argued.

Prosecutors filed a pretrial memo filed with U.S. District Judge John D. Bates in Washington, DC, noting Aetna announced in August that it would stop selling policies on Obamacare exchanges in Florida, Georgia, and Missouri. The prosecution implied that the insurer did so in relation to the antitrust case.

"A firm should not be able to avoid judicial review by withdrawing from a market in an effort to undermine the government's case—particularly where it can reverse that decision," the memo said.

Aetna responded by saying that the decision was made solely for business reasons—specifically a projected $300 million in 2016 in Obamacare plans. "The government's effort to create a sideshow about Aetna's intent does not change the fact that Aetna's exit from the challenged counties forecloses the possibility of any anticompetitive effects in those counties," the insurer's attorneys wrote.

"It is beyond dispute that ACA exchanges are threatening to collapse under their own weight. The government appears intent on punishing Aetna for refusing to continue in a deeply flawed program."

Gregory A. Freeman is a contributing writer for HealthLeaders.


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