Completed Cigna acquisition could mean $3B fine for Anthem

Witness stand in courtroom
If it completes its acquisition of Cigna, Anthem will have 120 days to propose a plan to return to compliance with a rule that says it must derive the bulk of its nationwide revenue from Blue Cross Blue Shield-branded products. (Getty/aerogondo)

If Anthem successfully acquires Cigna, it could find itself paying a steep price for being out of compliance with Blue Cross Blue Shield Association rules.

This week, Anthem began its defense of the acquisition in federal court during phase one of a two-part trial. It is facing an antitrust lawsuit from the Justice Department, which claims the deal will illegally harm competition—especially in the employer-sponsored insurance market.

Steve Schlegel, Anthem’s vice president for corporate development, testified Wednesday that the merged company would fall short of the BCBSA’s requirement that it get the bulk of its nationwide revenue from Blues-branded products, according to Bloomberg. To comply with that rule, 23% of Cigna’s domestic revenue would need to be rebranded, he said. Anthem will have 120 days to propose a plan to return to compliance with BCBSA’s rule, and two years to implement an approved plan, or face a fine of about $3 billion.

Yet Schlegel said Anthem did not plan to convert Cigna to Anthem in each of the 14 states where the latter enjoys BCBS exclusivity. Instead, he said the company wants to encourage customers to move voluntarily. In his testimony, former Chief Financial Officer Wayne DeVeydt said it was not Anthem’s plan to let Cigna “wither away,” the article adds.

One of the DOJ’s core arguments against the deal has been the potential for a difficult integration between Anthem and Cigna. Not only has it emphasized a deepening conflict between the companies, but it has also questioned whether Cigna will be able to continue its innovative business model postmerger.

But Morgan Kendrick, Anthem’s president of national accounts, testified that one of the primary reasons Anthem wanted to acquire Cigna was because the insurer is known for being “exceptionally innovative,” FierceHealthPayer has reported. Anthem hopes to use Cigna’s strengths to compete with other Blues plans, he said.