Anthem, Cigna don’t get along (but they’ll never tell in court)

(Bloomberg) — Anthem and Cigna Corp. are refusing to provide letters between the two insurers that the U.S. government contends will show that they get along so poorly that they wouldn't be able to effectively merge.

In federal court papers filed Thursday, Anthem said that Department of Justice prosecutors seeking to block the deal shouldn't have access to letters between Anthem and Cigna's lawyers where they disagree about aspects of the $48 billion takeover by Anthem.

"Seeking to air defendants' disputes in the hopes of fomenting a breakdown of the merger without judicial review, or seeking to peer into defendants' legal strategy, are not legitimate bases" for seeing messages that Anthem said on Thursday are privileged communications.

A day earlier, the Justice Department filed a motion seeking to compel the companies to produce the correspondence. The department has sued to block the merger on antitrust grounds, and argued in the Wednesday filing that "hostility between the plaintiffs could hamper integration efforts."

Anthem said disagreements won't stop them from doing business together. "Adversity does not destroy defendants' common interest," Anthem said in the court papers.

Bigger synergies

In fact, the deal with Cigna will save even more than originally predicted, Indianapolis, Indiana-based Anthem said. In the filing, Anthem said the companies would have annual synergies of $2.6 billion to $3.4 billion, compared with the about $2 billion the companies predicted when they announced the transaction in July 2015.

By combining, they'll be able to get better rates from doctors and hospitals, Anthem said.

"Generally, Cigna's provider rates are higher than Anthem's in areas where both operate, due to Cigna's smaller enrollment," Anthem said in the court papers. "Cigna's customers stand to benefit from Anthem's superior cost position." The synergies will also include new products and growing numbers of customers, Anthem said.

Matthew Asensio, a Cigna spokesman, declined to comment. Jill Becher, an Anthem spokeswoman, didn't immediately respond to a request for comment.

Company disagreements

On Wednesday, the Justice Department said that in-house attorneys for the companies had exchanged letters last month alleging each violated the deal's terms.

"Governance disputes between defendants have escalated, and the firms are now accusing each other of breaching the merger agreement," the U.S. said in the filing. "Because the breach letters reveal the current state of hostility between defendants, the letters evince barriers to integrating these firms and are relevant" to one of the defenses raised by the companies.

Tensions between Anthem and Cigna have been evident since before the Justice Department sued the companies in July to stop the merger, which it says would reduce competition and reduce choice for consumers. At a court hearing in August, an Anthem lawyer said there is "contentiousness" with Cigna and that Cigna intends to walk away from the deal after an April 30 deadline for closing the deal rather than extend the timing.

The government lawsuit is scheduled to go to trial on Nov. 21.

The case is U.S. v. Anthem, 16-cv-1493, U.S. District Court for the District of Columbia (Washington).

—With assistance from Andrew Harris, Zachary Tracer and David McLaughlin.

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