The stakes are high as the Department of Justice's antitrust case against Anthem and Cigna'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's $43 billion merger with Humana. 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.
Focus on large employers
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."
Anthem-Cigna rivalry at issue
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.
"They've cited some of them in their complaint documents that show that Anthem was particularly concerned about Cigna as a rival, and saw it as its most formidable rival, and bid consistently against it," said Professor Greaney. "They want to get the story out that there's something going on here besides creating efficiencies."
Changing healthcare landscape
Judge Amy Berman Jackson is presiding over the Anthem-Cigna bench trial and has promised to issues a ruling in the case in January, but the case is unfolding against the backdrop of a major shift in Washington when it comes to health care.
President-elect Donald J. Trump and the incoming Republican-controlled Congress have vowed to repeal and replace Obamacare, President Barack Obama's signature health reform law.
Inside the courtroom, the fate of the Affordable Care Act may not matter in this case, said Goodwin's Andrea Murino.
"What judge Berman Jackson will do is just look at the world as it is today, because that's all she really can do," Murino said, "We don't know what a Trump presidency will look like. We don't know what's going to happen… with the ACA or the (health insurance) exchanges. We just can't predict that."
Some analysts and investors have anticipated that the Trump administration will be more merger-friendly and less aggressive than the Obama administration in pursuing antitrust cases.
Professor Tim Greaney said any deal of the size of the Anthem-Cigna and Aetna-Humana health insurance mergers would invite scrutiny under any administration.
"Historically, antitrust has been a fairly bipartisan affair. There has a been a consensus in the United States that competition is good and it's harmed when monopolies get created," Greaney said.