Law360 (March 7, 2019, 9:38 PM EST) — Anxious Blue Cross companies flirted with raising member breakaway costs to as high as $10 billion as Blue member Anthem Inc. pursued a doomed, $54 billion merger with Cigna Corp. the group’s president said Thursday during a Chancery Court trial on the two insurance giants’ damage claims.
Blue Cross Blue Shield Association President Scott P. Serota said the never-approved Blue member “re-establishment” fee hike, considered in 2015 and 2016, reflected defensive concerns that an Anthem-Cigna hybrid would exit the association, shed its geographic franchise restrictions and take on the remaining Blues nationwide.
Instead, the Justice Department won a suit to block the deal on antitrust grounds in early 2017. Anthem — the nation’s largest Blue insurer — and non-Blue Cigna immediately began pursuing billions in damage claims against one another in Delaware for the merger collapse. And the Blues associations’ own antitrust baggage, geographic franchise rules and business restrictions became part of the litigation scrum.
“The plans don’t want to hear that a member of the association is going to compete aggressively against them. That’s not something they would be excited about hearing,” Serota testified during the ninth day of the 10-day proceeding before Vice Chancellor J. Travis Laster. Restoring Blue-branded insurance in Anthem’s 14-state area, Serota said, would be a costly problem.
“I didn’t do the math, but it was a big number,” Serota said of the scale of the change considered by members, a move that could have weaponized fees established to finance replacement of Blue companies in the event of a departure. Association members also considered changes that would have prevented Cigna from accessing Anthem provider discounts, Serota said.