With the first phase of the trial in the government's challenge to the merger of Anthem and Cigna wrapping up last Tuesday, several things seem to be coming into focus. The government has put on a strong case that the merger will produce significant market concentration in the sale of insurance plan services to large national employers. The merging parties' best hope relies on potential large cost savings resulting from their ability to extract price concessions from hospitals and physicians. Less clear, however, is whether those savings are either legally cognizable or sufficient to offset the harms resulting from increased market power.
At the outset of the case, Judge Amy Berman Jackson split the litigation into two phases. The first focused on the Justice Department's claim that the merger would reduce competition in the market for national accounts. Judge Jackson paused the case for a week to determine whether she could issue an injunction barring the merger based on the evidence presented on that claim alone.
The second phase of the litigation deals with the Department of Justice's (DoJ's) other claim, that local competition in 35 markets would be adversely affected by the market power of the combined Anthem-Cigna entity in both the sale of insurance services and negotiations with doctors and hospitals. Although this phase has begun, the judge indicated that she might yet issue an order truncating the proceeding based on the national accounts issue if appropriate.
