Anthem, Cigna trial starts as AMA comes out against the mega-merger

As Anthem, Cigna and the Department of Justice begin their court battle Monday, the American Medical Association has weighed in on the proposed merger saying that consolidation would result in higher premiums, not the promised efficiencies and lower costs.

"Peer-reviewed evidence is now available indicating health insurer consolidation has resulted in higher premiums…," said Andrew W. Gurman, MD, president of the AMS. "Allowing Anthem and Cigna to create a health insurance Goliath would compromise physicians' ability to advocate for their patients--something we consider an integral part of our place in society. In practice, market power allows insurers to exert control over clinical decisions, which undermines our relationships with patients and eliminates crucial safeguards of patient care."

Anthem proposes buying Cigna for $54 billion, a move the Department of Justice challenged in July.

[Also: Analysts are split on how Trump presidency will impact Anthem-Cigna, Aetna-Humana mergers]

Anthem Chief Executive Joseph Swedish and Cigna CEO David Cordani are expected to be called as witnesses.

U.S. District Court Judge Amy Berman Jackson has said she would hear the argument in two parts. The first will relate to the national implications of the deal, and the second, expected to be heard in January, will address regional issues.

The merger is being called the largest in the industry, as it, and a proposed $37 billion merger between Aetna and Humana, would reduce the number of mega-insurers from five to three, including UnitedHealthcare.

The Aetna and Humana trial starts under a separate judge, Monday, Dec. 5.

The Department of Justice, under the Obama administration, has gone after the insurers on antitrust grounds. Experts are reportedly mixed on whether President-elect Donald Trump will influence the DOJ's stand on these or future mergers.

[Also: Anthem/Cigna outspend Aetna/Humana in 3rd quarter lobbying as their merger trials near]

The DOJ has argued consolidation would reduce competition, while the insurers say the deals would lead to better efficiencies and lower costs.

The Aetna-Humana deal is seen as having the better chance of going through. That case centers on the Medicare Advantage market.

The Anthem and Cigna case involves the commercial insurance market, and there's been more pretrial tension. Each insurer has accused the other of breaking the terms of the merger agreement, according to court documents.

At a fall hearing, a Cigna lawyer made the unorthodox request of asking Judge Berman Jackson for the opportunity during trial to object to questions Anthem lawyers might ask of Cigna executives on the witness stand, according to the Wall Street Journal.

Anthem said in a legal filing it expects Cigna to try to back out of the deal as soon as it is legally able--a date that Anthem can push back to April 30, 2017, according to the WSJ.

Anthem's break-up fee should the deal fall through is $1.8 billion, payable to Cigna.

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"The lack of a competitive commercial health insurance market is a huge problem in 71 percent of the nation's metropolitan areas," Gurman said. "A merger between Anthem-Cigna would further diminish competition in 121 metropolitan areas located throughout the 14 states where Anthem is licensed to provide commercial coverage."

"We see both hospitals and insurers trying to consolidate with the idea that if you can just get a big enough group of people it will all work out," said Jim Pyles, principal and co-founder of Powers, Pyles, Sutter and Verville.

No matter how big a group of consumers, healthcare is getting more costly and there's no rolling that back, he said.

Twitter: @SusanJMorse