(Bloomberg) -- The first phase of the U.S. Justice Department’s lawsuit to halt Anthem Inc.’s planned takeover of rival insurer Cigna Corp. is in the hands of a federal judge after the government wrapped up its arguments Tuesday that the deal would harm competition in the national insurance market.
U.S. District Judge Amy Berman Jackson in Washington will issue her decision on whether the combination of the companies risks higher costs for large employers around the country and should be blocked. She didn’t say when she would rule.
During Tuesday’s session, Jackson questioned lawyers for Anthem and the Justice Department on their arguments about the competitive effects of the $48 billion deal. She said Anthem’s calculations related to market-share data for competitors were "distressing."
"You ended up undercutting the force of your argument," the judge said about the company’s final filing with the court, which wasn’t publicly available, adding that it was "a little insulting."
In what are expected to be the final major antitrust cases of the Obama administration, the Justice Department sued Humana Inc. and Aetna Inc. in July, the same day it filed a complaint seeking to halt Anthem’s acquisition of Cigna. The antitrust lawsuits are aimed at preventing concentration among the biggest U.S. health insurers and protect competition in an industry that President Barack Obama reshaped with the 2010 Patient Protection and Affordable Care Act.
The first phase of the trial focused on the national market where Anthem and Cigna compete. The government said the deal would leave just three insurers in the U.S. that can offer a nationwide commercial insurance network to the country’s biggest employers.
Anthem and Cigna compete aggressively to win these accounts and their combination would eliminate Cigna as a competitive force, according to the government.
Jackson questioned Justice Department lawyer Jon Jacobs about Cigna’s clout, considering its market share is smaller than Anthem’s in the 14 states where Anthem operates. Jacobs countered by pointing to evidence that Cigna’s presence has kept prices down for employers.
"They’re losing the benefit of competition" if the merger goes through, Jacobs said.
Central to the dispute is how the deal would affect doctors and hospitals. Anthem, based in Indianapolis, Indiana, argues that the acquisition of Cigna, based in Bloomfield, Connecticut, would give it the ability to lower reimbursement rates to health providers and that those savings would be passed on to employers. The government counters that’s just another exercise of market power that violates antitrust law.
"If you’re driving prices down in a consumer-orientated way, that’s favored," Anthem lawyer Christopher Curran told the judge.
Curran said that other insurance carriers would keep prices in check after the merger. He cited evidence showing that any attempt by the combined company to raise prices would backfire because it would lose customers, making the price increase unprofitable.
The second phase of the trial, scheduled to begin Wednesday, will focus on the sale of insurance to smaller employers in local markets. A decision by Jackson in favor of the government on the first phase would block the merger and make the second phase moot.
"We’re going on to phase two, no one should draw any conclusions from that one way or another," the judge said.
The tensions between Anthem and Cigna, which have accused one another of breaching their merger agreement, erupted again Tuesday.
At the end of the question-and-answer session, Cigna lawyer Rick Rule said the insurer didn’t sign on to Anthem’s summary filing on the first phase of the trial because parts of it were "inconsistent" with statements by its witnesses. Rule also said the dispute between the companies went beyond their chief executive officers.
The case is U.S. v. Anthem Inc., 16-cv-1493, U.S. District Court, District of Columbia (Washington).