Anthem-Cigna Court Documents Show Potential Pitfalls of Merger

Recently unsealed court testimony from the Anthem-Cigna merger trial highlights significant problems between the 2 companies, which may raise questions as to why the companies are continuing to seek approval for the deal.

The trial to block the $48 billion Anthem-Cigna merger commenced last week after the Justice Department challenged the deal due to antitrust reasons. A large portion of the trial has been made public, but US District Judge Amy Berman Jackson closed the court for testimony of the chief executives of both companies, who said privileged business information could potentially be revealed, The Wall Street Journal reported.

However, the testimonies were unsealed after 7 media organizations requested the documents be opened.

There have been multiple reports about bickering between Anthem and Cigna. The companies have even gone as far as accusing each other of violating the terms of their agreement, but they still plan to proceed with the merger.

According to the Journal, Cigna executives are now questioning Anthem’s intentions post-merger, and Anthem has tried to move things forward, although Cigna stopped cooperating about several merger issues.

The testimony stated that Anthem’s Chief Executive Joseph R. Swedish said the company created an undisclosed team to conduct merger-related operations without including Cigna in the dealings. However, Swedish said that the team was created at the suggestion of the company’s lawyers, since Cigna stopped cooperating in certain aspects of the merger.

Internal documents also suggest that the companies are not getting along. In an exchange between Swedish and Cigna CEO David Cordani, Swedish called the companies’ integration plans “unacceptable,” the Journal reported. Another document from Anthem said that moving forward with the merger was hindered due to a lack of participation on Cigna’s side.

Anthem’s testimony also showed that Cigna pushed back when Swedish said Cordani would not be overseeing all of the newly-created company’s major business units, according to the report. After this, Swedish retracted and expanded the offer to include authority over all business units. However, Swedish remains unsure of whether Cordani plans to stay with the company, since he has never directly said he plans to do so.

Cordani testified that Cigna stopped working on the merger over the summer, and said that he worries Anthem’s plans will weaken Cigna’s network and values, according to the Journal.

He also argued that Anthem’s strategy could potentially affect competition by weakening Cigna’s offerings, which is the reason the Department of Justice initiated the trial.

Cordani went as far as sharing the company’s disapproval of Anthem’s advertisement that the merger would increase competitive benefit, because they believe choices will be limited. Anthem stated that the merger will generate more cost-savings and benefit customers, and despite its size, it will not have enough power to increase prices.

If the 2 companies do not work out their issues with each other, Cigna will receive a $1.85 billion break-up fee paid by Anthem, the Journal said. Although Cigna made it clear that they do not agree with Anthem’s approaches and tactics, Cordani said they will continue to move forward, and that their conflicts do not reflect the ability of the merger to continue, according to the Journal.

The Department of Justice plans to use the disputes between Anthem and Cigna to strengthen their argument that any benefits from the merger would be impeded.