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United States v. Anthem, Inc.

United States District Court, District of Columbia

February 8, 2017

UNITED STATES OF AMERICA, et al., Plaintiffs,
v.
ANTHEM, INC., et al., Defendants.

          MEMORANDUM OPINION

          AMY BERMAN JACKSON United States District Judge.

         Anthem and Cigna, the nation's second and third largest medical health insurance carriers, have agreed to merge. They propose to create the single largest seller of medical healthcare coverage to large commercial accounts, in a market in which there are only four national carriers still standing. The United States Department of Justice, eleven states, and the District of Columbia have sued to stop the merger, and they have carried their burden to demonstrate that the proposed combination is likely to have a substantial effect on competition in what is already a highly concentrated market. Therefore, the Court will not permit the merger to go forward.

         Judgment will be entered in favor of the plaintiffs on their first claim, and the merger will be enjoined due to its likely impact on the market for the sale of health insurance to “national accounts” - customers with more than 5000 employees, usually spread over at least two states - within the fourteen states where Anthem operates as the Blue Cross Blue Shield licensee. So the Court does not need to go on to decide the question of whether the combination will also affect competition in the sale to national accounts within the larger geographic market consisting of the entire United States. The Court also does not need to rule on the allegations in plaintiffs' second claim that the merger will harm competition downstream in a different product market: the sale of health insurance to “large group” employers of more than 100 employees in thirty-five separate local regions within the Anthem states. But the evidence has shown that the proposed acquisition will have an anticompetitive effect on the sale of health insurance to large groups in at least one of those markets: Richmond, Virginia. Finally, given the ruling against the merger, the Court need not reach the allegations in the complaint that the merger will also harm competition upstream in the market for the purchase of healthcare services from hospitals and physicians in the same 35 locations.

         What follows is a summary of the ruling on the first claim in the complaint. The Court finds first that the market for the sale of health insurance to national accounts is a properly drawn product market for purposes of the antitrust laws, and that the fourteen states in which Anthem enjoys the exclusive right to compete under the Blue Cross Blue Shield banner comprise a relevant geographic market for that product.

         The evidence demonstrated that large national employers have a unique set of characteristics and needs that drive their purchasing processes and decisions, and that the industry as a whole recognizes national accounts as a distinct market. Witness after witness agreed that there are only four national carriers offering the broad medical provider networks and account management capabilities needed to serve a typical national account. Notably, both Anthem and Cigna have established business units devoted to national accounts, and these separate profit and loss centers each have their own executives, sales teams, and customer service personnel. While various brokers and insurance carriers may draw differing lines to define the boundaries of a “national account, ” the government's use of 5000 employees as the threshold is consistent with how both Anthem and Cigna identify the accounts within their own companies. Moreover, when measured against the appropriate legal standard, the government's definition was sufficient to include reasonable substitutes and to fairly capture the competitive significance of other products.

         The geographic market also passes the legal test since the Blue Cross Blue Shield Association rules have a significant impact on the commercial conditions governing the sale of medical coverage to national accounts, and Anthem's exclusive territory is where the acquisition will have a direct and immediate effect on competition.

         Next, the Court finds that plaintiffs have established that the high level of concentration in this market that would result from the merger is presumptively unlawful under the U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines, which courts regularly consult for guidance in these cases. The evidence has also shown that the merger is likely to result in higher prices, and that it will have other anticompetitive effects: it will eliminate the two firms' vigorous competition against each other for national accounts, reduce the number of national carriers available to respond to solicitations in the future, and diminish the prospects for innovation in the market.

         Within the national accounts market, health benefits coverage is a differentiated product, which means that individually customized policies are sold to customers one at a time - in this case, through a bid solicitation process. National account customers evaluate responses to their requests for proposals based upon a number of factors, including the amount of the fees charged by each carrier for claims administration services; the quality and breadth of the carrier's medical provider network; the extent of the discounts the carrier has negotiated with those providers; whether the carrier is willing to guarantee that the customer's medical costs will not increase by more than a particular percentage; and other features of interest to any particular customer. The expert testimony as well as the firms' internal documents reflect that while Anthem tends to enjoy superior discounts, the two companies are competing head-to-head with respect to many of the other aspects of their offerings, all of which can factor into the employer's total cost per employee for medical benefits.

         The defense came forward with evidence to rebut the presumption, shifting the burden back to the government, but the Court concludes based on the entire record that plaintiffs have carried their burden to show that the effect of the acquisition may be to substantially lessen competition in violation of Section 7 of the Clayton Antitrust Act. Defendants insist that customers face an array of alternatives, and that there are many new entrants poised to shake up the market. But entering the commercial health insurance market is not such an easy proposition. And while third party administrators and new insurance ventures being launched by strong local healthcare systems may be attractive to smaller or more localized customers, it became quite clear from the evidence that the larger a company gets, and the more geographically dispersed its employees become, the fewer solutions are available to meet its network and administrative needs. Thus, regional firms and new specialized “niche” companies that lack a national network are not viable options for the vast majority of national accounts, and they will not ameliorate the anticompetitive effects of this merger.

         While defense economists theorized that large customers are free to “slice” their insurance business and contract with multiple carriers to cover different geographic regions and employee preferences, the record shows that there are substantial costs and administrative burdens associated with fragmentation, so employers do not elect to do it very often. The national accounts that do slice tend to use no more than two companies, usually chosen from among the big four national carriers and possibly a particularly strong regional option, such as Kaiser, the uniquely popular health maintenance organization in California. Anthem and its experts made much of the advent of private exchanges - sets of prepackaged plans that afford customers the opportunity to offer their employees a choice of several options - but those have proved to be largely just another vehicle for delivering the major national carriers' products to the market. The defense repeatedly drew attention to the existence of third party administrators, provider-sponsored plans, and other specialty firms that have recently begun to populate the insurance marketplace. But to the extent these so-called new entrants and competitors are owned by, teamed with, rent networks from, or funnel business to the big four national carriers, they do not alter the competitive landscape, and in fact, they represent multiple additional arenas where the constriction of competition will be felt.

         Anthem has taken the lead in defending the transaction, and it contends that any anticompetitive effects will be outweighed by the efficiencies it will generate. It points, in part, to substantial general and administrative (“G&A”) cost savings that have been projected to be achieved through the combination of the two companies. And the centerpiece of its defense is its contention that Anthem and Cigna national account customers will save a combined total of over $2 billion in medical expenditures because Cigna members will be able to access the more favorable discounts that Anthem has negotiated with its provider network, Anthem members will have the benefit of any lower rates that Cigna has obtained, and those costs are paid directly by the employers. In short, Anthem maintains that the overriding benefit of the merger is that the new company will be able to deliver Cigna's highly regarded value-based products at the lower Anthem price.

         But the claimed medical cost savings are not cognizable efficiencies since they are not merger-specific, they are not verifiable, and it is questionable whether they are “efficiencies” at all. And the projected G&A efficiencies suffer from significant verification problems as well.

         The law is clear that a defendant must both substantiate any claimed efficiencies and demonstrate that they are “merger-specific, ” which means that it must show that the savings cannot be accomplished by either company alone in the absence of the proposed merger. But here, Anthem and Cigna have already obtained the provider discounts alone. The medical network savings are not merger-specific because they are based upon the application of existing discounts to an existing patient population that the companies have already delivered to the providers; the calculations do not depend upon the expectation that the volume of patients will increase by virtue of the merger.

         Furthermore, it is plain that the companies do not have to merge for customers to be able to access Anthem's lower provider rates: any customers that value the discounts above other aspects of the contractual arrangement can choose Anthem as their carrier today. As the Anthem executives responsible for the integration agreed, one of the most likely mechanisms to be employed to achieve the savings - the “rebranding” of Cigna customers as Blue customers - is no different from Anthem's ongoing marketing of its products on a daily basis. Also, there is nothing stopping Anthem from improving its wellness programs, or any other offerings that Cigna now does better, on its own.

         It is also questionable whether Anthem's ability to drive a hard bargain with providers by virtue of its size can be characterized as an “efficiency” at all. The Guidelines define an efficiency as something that would enable the combined firm to achieve lower costs for a given quantity and quality of product. Here, the combined firm will not be selling healthcare. Its “product” in the national accounts market - as Anthem has emphasized since the first day of the trial - is “ASO” or “administrative services only” contracts, which include claims administration, claims adjudication, and access to a network of health providers. So there is no evidence that the claimed network savings will arise because the cost of what the merged firm produces, and what it sells in the relevant market, will go down.

         Anthem characterizes this scenario as a supply-side efficiency resulting from the merger, but it has not shown that there is anything about the mere combination of the carriers' two pools of patients that will enable doctors or hospitals to treat patients more expeditiously or at a lower cost. Since the medical cost savings will not be accomplished by streamlining the two firms' operations, creating a better product that neither carrier can offer alone, or even by enabling the providers to operate more efficiently, they do not represent any “efficiency” that will be introduced into the marketplace.

         Anthem is asking the Court to go beyond what any court has done before: to bless this merger because customers may end up paying less to healthcare providers for the services that the providers deliver even though the same customers are also likely to end up paying more for what the defendants sell: the ASO contracts that are the sole product offered in the market at issue in this merger. It asks the Court to do this because it is the insurers that negotiate the in-network provider discounts, access to those rates is part of what the customers are buying when they buy health insurance, and medical costs account for the overwhelming portion of any customer's total healthcare expenditure. In short, Anthem is encouraging the Court to ignore the risks posed by the proposed constriction in the health insurance industry in the relevant market on the grounds that consumers might benefit from the large size of the new company in other ways at the end of the day. But this is not a cognizable defense to an antitrust case; the antitrust laws are designed to protect competition, and the claimed efficiencies do not arise out of, or facilitate, competition. Moreover, Anthem's own documents reveal that the firm has considered a number of ways to capture the network savings for itself and not pass them through to the customers as it insisted in court that it would.

         Anthem argues that even if expanding access to provider discounts does not technically qualify as an antitrust efficiency that can offset anticompetitive effects on a dollar-for-dollar basis, it is a factor to be taken into consideration in assessing the overall impact of a merger in a market where it is universally acknowledged that growing costs must be controlled. In short, the Court should decide that the pressure the merger would place on providers would be beneficial to consumers in general. But the record created for this case did not begin to provide the information needed to reveal whether all providers, no matter their size, location, or financial structure, are operating at comfortable margins well above their costs, as Anthem's expert suggested, or whether Anthem's use of its market power to strong-arm providers would reduce the quality or availability of healthcare as the plaintiffs alleged. And the trial did not produce the sort of record that would enable the Court to make - nor should it make - complex policy decisions about the overall allocation of healthcare dollars in the United States.

         More important, Anthem has not been able to demonstrate that its plan is achievable or that it will benefit consumers as advertised. One of the other key strategies Anthem intends to employ to generate the claimed savings is to unilaterally invoke provisions in provider contracts that require physicians or facilities to extend Anthem's discounted fee schedule to Anthem's affiliates. But even the Anthem executives have expressed doubts that the providers will take this lying down, and they have acknowledged that they have no plan in hand for whether they will proceed by rebranding on the customer side, by renegotiating contracts on the provider side, or by enforcing these affiliate clauses in any particular situation.

         There was also considerable testimony that an enforced reduction in fees paid to providers through rebranding or contractual mechanisms could erode the relationships between insurers and providers. It would also reduce the collaboration that industry participants agree is an essential aspect of the growing trend to move from a pure fee-for-service based system to a more value-based model as a means of both lowering the cost and improving the outcome of the delivery of healthcare in this country. And here, the Court cannot fail to point out that it is bound to consider all of the evidence in the record in connection with the question of whether the merger will benefit competition, and in this case, that includes the doubt sown into the record by Cigna itself.

         This brings us to the elephant in the courtroom. In this case, the Department of Justice is not the only party raising questions about Anthem's characterization of the outcome of the merger: one of the two merging parties is also actively warning against it. Cigna officials provided compelling testimony undermining the projections of future savings, and the disagreement runs so deep that Cigna cross-examined the defendants' own expert and refused to sign Anthem's Findings of Fact and Conclusions of Law on the grounds that they “reflect Anthem's perspective” and that some of the findings “are inconsistent with the testimony of Cigna witnesses.” Anthem urges the Court to look away, and it attempts to minimize the merging parties' differences as a “side issue, ” a mere “rift between the CEOs.” But the Court cannot properly ignore the remarkable circumstances that have unfolded both before and during the trial.

         The documentary record and the testimony reflect that the pre-merger integration planning that is necessary to capture any hoped-for synergies is stalled and incomplete. Much of the work has not proceeded past the initial stage of identifying goals and targets to actually specifying the steps to be taken jointly to implement them. Moreover, the relationship between the companies is marked by a fundamental difference of opinion over the effect the Anthem strategy to impose lower rates on providers and move members away from Cigna's network will have on the collaborative model of care that is central to the Cigna brand. Both Cigna witnesses and providers have testified that effective collaboration requires more of the physicians and hospitals, and they expect to be paid for it, and the engagement with members to improve behaviors that can affect wellness requires an investment of resources on the part of the insurer. All of this raises serious questions about when, how, and whether the medical savings can be achieved, whether the G&A savings can be verified, and whether there is any basis in the record to believe in the rosy vision being put forward by Anthem of a new national carrier that delivers the Cigna product at the Anthem price.

         In sum, the theme of Anthem's defense is that its greater ability to command discounts from providers will save customers money at the end of the day. At the same time, Cigna says that its collaboration with providers will save customers money at the end of the day. Plaintiffs take the position that customers should continue to have a choice between these options, and the Court agrees.

         While Anthem has also moved to incorporate quality and cost savings incentives into its provider contracts, Cigna has sought to differentiate itself with its approach towards reducing costs by increasing health. Its message is that better information and clinical management on the provider side, along with encouraging behaviors that support health on the patient side, can reduce a patient's need to be hospitalized or undergo expensive medical procedures at all, and that this decrease in utilization will reduce the total medical cost per employee over time. For this reason, some customers prefer Cigna notwithstanding its discount disadvantage, and there was some testimony from medical personnel that the approach is working. Eliminating this competition from the marketplace would diminish the opportunity for the firms' ideas to be tested and refined, when this is just the sort of innovation the antitrust rules are supposed to foster. Considering all of these circumstances, and for all of the reasons set forth in greater detail in this opinion, the Court is persuaded that the merger should not take place.

         OUTLINE OF OPINION

         BACKGROUND .......................................................................................................................... 13

         I. The Parties and Proposed Merger ...................................................................................... 13

         II. Procedural History ............................................................................................................. 15

         III. Overview of the Commercial Healthcare Industry ............................................................ 17

         A. The customers ............................................................................................................ 17

         B. The plans ................................................................................................................... 18

         C. The networks ............................................................................................................. 19

         D. Other industry participants and options for employers ............................................. 21

         LEGAL STANDARD ................................................................................................................... 22

         ANALYSIS ................................................................................................................................... 24

         I. Plaintiffs have met their initial burden to show that the merger is presumptively anticompetitive in the market for the sale of health insurance to national accounts within the fourteen Anthem states. . ...................................................... 25

         A. The sale of medical health coverage to national accounts within the fourteen Anthem states is a relevant market. . .......................................................................... 25

         1. The sale of health insurance to national accounts with more than 5000 employees is a relevant product market. . .............................................................. 26

         a. The proposed product market ...................................................................... 29

         b. National accounts are a unique set of customers with unique needs. . ......... 30

         c. 5000 employees is an appropriate definition. . ............................................. 32

         1) Practical indicia support the definition. . ................................................ 32

         2) Economic expert testimony supports the definition ............................... 34

         a) Plaintiffs' expert ............................................................................. 35

         b) Defense experts .............................................................................. 36

         2. The fourteen Anthem states comprise a relevant geographic market. . ................. 40

         B. Market share and concentrations in the relevant market establish the presumption. . ............................................................................................................. 48

         1. Plaintiffs' expert's calculations ............................................................................. 50

         2. Defense experts' critiques ..................................................................................... 53

         C. Evidence of price effects supports the prima facie case. .. ......................................... 58

         II. Defendants have come forward with evidence to rebut the prima facie case. . .................. 60

         III. Plaintiffs have carried their burden to establish that the merger is likely to harm competition. . ...................................................................................................................... 64

         A. The merger will have the unilateral effect of eliminating the existing head-to-head competition between Anthem and Cigna. . ........................................................ 65

         B. The merger will reduce the number of significant competitors in the market. . ........ 73

         C. National account customer sophistication and bargaining power are not sufficient to ameliorate the anticompetitive effects. . ................................................ 74

         D. New entrants and expansion will not be a constraint on the new firm ...................... 74

         1. There are significant barriers to entry and history shows a lack of success by new entrants. . ................................................................................................... 76

         2. Large regional carriers are not an option. . ............................................................ 79

         3. Slicing is not a practical solution. . ........................................................................ 80

         4. Other options do not serve national accounts' needs and are often alternative distribution channels for the Big Four. . ................................................................ 82

         E. The merger will reduce innovation in the market. . ................................................... 89

         IV. The claimed efficiencies do not outweigh the anticompetitive effects of the merger. . .............................................................................................................................. 92

         A. Anthem has presented some evidence of efficiencies. . ............................................. 92

         1. Medical Cost Savings ........................................................................................... 92

         2. General and Administrative Savings .................................................................... 97

         B. The Court may consider evidence of efficiencies. . ................................................... 99

         C. The claimed savings are not cognizable efficiencies. . ............................................ 102

         1. The medical network savings are not merger-specific. . ..................................... 102

         2. The claimed savings are not verifiable. . ............................................................. 112

         3. It is questionable whether the medical cost savings can rebut the prima facie case since there is no evidence of “efficiencies” created in the relevant market. . ............................................................................................................... 123

         D. The potential buy-side savings do not change the analysis of the merger's competitive effects. . ................................................................................................ 126

         V. The merger is also likely to cause anticompetitive harm in the market for the sale of medical insurance coverage to large group employers. . .............................................. 130

         A. Plaintiffs have met their initial burden to show that the merger is presumptively anticompetitive in the Richmond, Virginia market. . ............................................... 131

         1. Relevant market .................................................................................................. 131

         2. Market share and concentration establish the presumption. . .............................. 134

         B. Defendants' rebuttal evidence ................................................................................. 137

         C. Plaintiffs have carried their burden to establish that the merger is likely to harm competition in the Richmond market. . .................................................................... 137

         CONCLUSION ........................................................................................................................... 140

         BACKGROUND

         I. The Parties and Proposed Merger

         Anthem is “one of the largest health benefits companies . . . in the United States, serving 38.6 million medical members through [its] affiliated health plans as of December 31, 2015.” PX 125, Anthem SEC 10-K Filing, Feb. 19, 2016, at 48. It offers medical healthcare benefits to a variety of customers including individuals, large and small employers, and Medicaid and Medicare enrollees. PX 125; PX 701. The company, which is based in Indianapolis, Indiana, is a member of the Blue Cross Blue Shield Association (“BCBSA”), an association of thirty-six health insurance companies licensed to use the Blue Cross and/or the Blue Shield brands. See Swedish (Anthem) Tr. 222. Anthem holds the exclusive license to use the Blue brands in all or part of fourteen states. PX 125; PX 701.[1] Anthem also owns and operates non-Blue Cross entities, which market health coverage under the Amerigroup, Simply, and CareMore brands in other states. PX 125.

         Cigna is a health services company based in Bloomfield, Connecticut. PX 701. It offers products and services to customers, including large employers, in the fifty states and the District of Columbia, as well as health benefits to employers internationally, operating in more than thirty countries. Cigna Answer [Dkt. 144] ¶ 11; Cigna SEC10-K Filing, Feb. 25, 2016, PX 284; DX 333. It covers approximately thirteen million medical members in the United States. Cigna Answer ¶ 11. Cigna also offers various specialty products and services, such as behavioral health, disability insurance, and dental and vision coverage, among others. See PX 284.

         On July 23, 2015, Anthem and Cigna entered into an Agreement and Plan of Merger, which their separate shareholders approved on December 3, 2015. PX 125; PX 284. According to Anthem, the transaction is valued at approximately $54.2 billion. Anthem Answer [Dkt. 15] ¶ 1. The planned equity ownership of the combined company is to be comprised of approximately 67% Anthem shareholders and 33% Cigna shareholders, PX 126, and the new firm is slated to provide medical coverage to more than fifty-three million people across its commercial and government segments. DX 325.

         The two firms are bound by their merger agreement through April 30, 2017. See Anthem's Reply Mem. in Supp. of Mot. for Expedited Status Conf. [Dkt. 17]. But since the initial decision to merge was announced, the relationship between the parties has started to fray. In December of 2015, the companies began to exchange letters and emails related to the integration, see, e.g., PX 2, PX 8, and they grew more heated over time. Through its CEO, Jospeh Swedish, Anthem expressed concerns about the pace and quality of the integration effort and the amount of data and information that was being shared. PX 1; PX 3; see also Swedish (Anthem) Tr. 323. Meanwhile, Cigna complained that Swedish was improperly reducing the role that the current Cigna CEO, David Cordani, would play in the new company, PX 4, and it took issue with Anthem's approach towards medical providers and its plans for the movement of members from Cigna to the Anthem brand. Cordani (Cigna) Tr. 492-93. By April of 2016, Cigna's participation in the integration activities had slowed, PX 725, and when this lawsuit was filed, it stopped altogether. See Schlegel (Anthem) Tr. 1412-13, 1431-32. By July 2016, counsel for the two companies began writing letters accusing the other party of breaching the merger agreement. See, e.g., PX 16; PX 17; PX 18; PX 19.

         II. Procedural History

         On July 21, 2016, plaintiffs the United States, the States of California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New Hampshire, New York, and Tennessee, the Commonwealth of Virginia, and the District of Columbia sued to enjoin the merger. Compl. [Dkt. 1]. Plaintiffs allege that the Anthem-Cigna merger will violate Section 7 of the Clayton Act, 15 U.S.C. § 18, because it will harm competition in the sale of commercial healthcare insurance to two groups of customers: “national accounts” and “large group employers.” Compl. ¶ 8.

         In their first claim, plaintiffs allege that the acquisition will harm competition in the sale of health insurance to national accounts both within a geographic market consisting of the fourteen Anthem states and in a market consisting of the United States as a whole. Compl. ¶¶ 19-37. The second claim alleges anticompetitive effects in the market for the sale of health benefits coverage to large group employers in 35 separate local regions within those states. Compl. ¶¶ 38-50. And in its third claim, plaintiffs allege that the newly formed company will use its market power to pressure doctors, hospitals, and other providers to lower their prices, so the merger will result in harm to competition in the market for the purchase of healthcare services, or a monopsony, in the same thirty-five geographic markets. Compl. ¶¶ 64-75.[2]

         Anthem answered the complaint on July 26, 2016, and Cigna answered on September 19, 2016. Extensive discovery was undertaken on an expedited schedule under the supervision of a Special Master appointed by the Court with the parties' consent. See Order Appointing Special Master [Dkt. 66], Scheduling Order [Dkt. 68], Interim Case Mgmt. Order [Dkt. 74]. The Court divided the presentation of evidence at trial into two phases: the first dealing with the effect of the merger on competition in the sale of commercial insurance to national accounts, and the second dealing with both its effect on competition in the sale to large group employer accounts in the thirty-five markets and the purchase of healthcare services from providers in those markets. Order Am. Order Appointing Special Master and Final Case Mgmt. Order [Dkt. 196] at 4.

         The bench trial began on November 21, 2016 and ended on January 4, 2017. The parties presented sixteen fact witnesses in Phase I and thirteen in Phase II, along with deposition excerpts from more than 100 individuals. Plaintiffs presented the testimony of two experts, one of whom testified in both phases. Anthem proffered three experts who each testified twice. Each side introduced more than 800 exhibits in each phase of the trial, and each side submitted two sets of proposed findings of fact and conclusions of law. [Dkt. 401, 404, 416, 417].

         III. Overview of the Commercial Healthcare Industry

         This case does not involve healthcare obtained through government programs such as Medicare or Medicaid, or health insurance sold to individuals either directly or through a public exchange. The allegations that were tried relate solely to the commercial market - the sale of medical benefits coverage to employers. To analyze the antitrust implications of the acquisition, it is necessary to have a general overview of how the commercial health insurance industry operates.

         A. The customers

         Millions of people in this country obtain healthcare insurance for themselves and their dependents through their employers. Commercial health insurance sold to employers is regulated by state and federal statutes;[3] state laws draw a distinction between healthcare insurance sold to “small group” and “large group” employers. Goulet (Anthem) Dep. 13-16. In forty-six states, a small group employer is defined as an employer with two to fifty employees, and in the remainder, small group employers are defined as having up to 100 employees. See Bailey (Cigna) Dep. 59- 60; Goulet (Anthem) Dep. 14-15. Employers with more than fifty or 100 employees, respectively, are considered “large group” employers. Goulet (Anthem) Dep. 15-16. This case concerns the sale of commercial healthcare insurance to large group employers; the employees and their dependents who are covered by the plans are referred to as “members” or “covered lives.”

         Because purchasing healthcare coverage can be a complex process, particularly for large group employers, these customers often work with consultants and insurance brokers. The consultants assist with determining and ranking the employers' needs, identifying the firms that can meet those needs, issuing requests for proposals (“RFPs”), negotiating with the top bidders, and making a final a contract decision. Abbott (WTW) Tr. 65-66.

         Within the industry, large group employers are generally divided into two categories according to size, and the larger entities within the large group segment are referred to as “national accounts.” The term is not defined by regulation, and the threshold used varies, but industry participants generally define national accounts by the number of individuals they employ, and many include a requirement that the employees reside in more than one state. Abbott (WTW) Tr. 157-58. Regardless of the numerical limits they apply, insurance carriers, consultants, and brokers tend to market, service, and account for their large group accounts and national accounts separately.

         B. The plans

         What health insurance carriers offer employers is a combination of claims administration services and access to a network of medical care providers that have agreed to treat the employees and their dependents at a discounted rate. Abbott (WTW) Tr. 74-75. Commercial insurance carriers provide employers with these networks and services through two types of plans: fully-insured plans and self-insured plans. Self-insured plans are also known as “ASO, ” or administrative services only, plans. Id.

         In either case, the insurer processes and adjudicates the members' claims. Fully-insured and ASO plans differ, though, with respect to who pays the medical costs and therefore bears the risk connected with those costs. In fully-insured plans, it is the insurer's obligation to cover the healthcare costs incurred by the employees and their dependents in addition to administering the claims. Thus it is the insurer that bears the risk of the members' medical costs, and it prices the premiums accordingly. Abbott (WTW) Tr. 69.

         In self-insured plans, the employer takes on the risk of the medical costs itself. Abbott (WTW) Tr. 69-70. It pays the insurer an ASO fee in return for both the access to the provider network and claims administration and adjudication services. But the employer pays the healthcare costs directly, usually by funding a bank account from which the insurer pays the claims as they are submitted by the providers. Abbott (WTW) Tr. 174. Therefore, ASO fees are lower than full insurance premiums. Abbott (WTW) Tr. 175; see Hayes (Aetna) 29-31. Larger employers tend to purchase ASO plans because they can spread the risk of the medical costs over a larger number of covered lives, [4] and smaller employers tend to purchase full insurance because they cannot.

         Finally, employers may purchase ancillary products such as dental coverage and behavioral health coverage from insurers, as well as other services, including employee wellness programs, data analytics to help employers and providers understand and manage their healthcare costs, and the technology to deliver claims information to members electronically. Generally speaking, the larger and more sophisticated the employer, the more customization it will seek when soliciting proposals from insurers. Abbott (WTW) Tr. 77.

         C. The networks

         Access to a network of medical care providers is an essential component of any commercial health insurance plan. Insurers create networks by entering into contractual arrangements with hospitals, doctors, and other healthcare professionals through which the providers agree to accept payment for services supplied to plan members at a discount in return for the volume of patients that the carrier will deliver to them as in-network providers. Drozdowski (Anthem) Tr. 1643-44. Employees who receive care from out-of-network providers face higher fee schedules with no discounts, Kertesz (Anthem) Tr. 538, so the breadth and depth of a carrier's network factors heavily into an employer's contracting decision.

         Anthem gains access to a national network for its customers by virtue of its membership in the Blue Cross Blue Shield Association. Association members enjoy an exclusive license to market insurance under the Blue brands within their individual territories, and therefore, no two Blue companies will ever bid on the same large group or national account, and no Blue licensee may bid on an account headquartered in another licensee's state without receiving a “cede” from that carrier. Bills (Anthem) Dep. 60, 85, 207-09.

         An important feature of the Blue Cross Blue Shield Association is the Blue Card System. Members of any Blue plan - those who carry a “Blue card” - are entitled to access the providers in the Blue networks in every state at the in-network rate. Swedish (Anthem) Tr. 226-27. The Blue Card network is the largest national provider network in the country. PX 208; PX 367.

         Blue plans refer to members whose employers are located within their licensed territories as “home” members, and members who receive services through the Blue network outside of their plans' service area as “host” members. Pogany (Anthem) Dep. 89; PX 125. Anthem has approximately 13 million national accounts members, including both home and host members. Pogany (Anthem) Dep. 87. Like all other members of the Blue Cross Blue Shield Association, Anthem receives Blue Card fees for network access and administrative services when it “hosts” a member of another Blue plan. PX 125. With its fourteen states, Anthem has the largest exclusive territory of any Blue Cross licensee; the second largest licensee has the exclusive rights to sell Blue products in five states. Swedish (Anthem) Tr. 222.

         D. Other industry participants and options for employers

         There are additional options for employers purchasing commercial health insurance that are of significance in this case:

Slicing: When a company employs workers in multiple parts of the country, it may choose to purchase a plan from a single carrier with a broad enough network to serve all its employees. These carriers include United Healthcare, Cigna, Aetna, and Anthem, with its Blue Cross Blue Shield network. Or, it may choose to piece together several plans from multiple carriers, either national or regional, that offer attractive networks in the specific areas where the employees reside. This practice is referred to as slicing. Employers may also slice insurance business across types of plans, to offer its employees a choice between more than one carrier with distinctive offerings or cost structures. Abbott (WTW) Tr. 85- 86.
Private Exchanges: In recent years, several of the large consultants in the health insurance industry have begun contracting with local, regional, and national insurers to put together packages of standard plans available in particular geographic areas, and then sell them as a whole to employers as an alternative to purchasing coverage directly from a single insurer. Sharp (Aon Hewitt) Dep. 10-11. Private exchanges give employers a means to offer employees choices among plans without assuming the burden of contracting with multiple carriers. Id. Aon Hewitt, Willis Towers Watson, Mercer, and Buck Consulting, owned by Xerox, are large consulting firms that that operate national private exchanges, Kertesz (Anthem) Tr. 662-63, and in response to this “disintermediation” by the consultants and brokers, Schumacher (United) Dep. 114; Hayes (Aetna) Dep. 238, the national carriers have begun building and marketing their own exchanges. Employees who choose Anthem or Cigna through an exchange are covered members who may access the network providers.
Direct Contracting: Some very large and centralized employers, such as Boeing and Intel, have brought the task of negotiating discounted healthcare services in-house by “direct contracting” with providers for discounted services, bypassing commercial insurers' networks. See DX 9; Abbott (WTW) Tr. 122; Bisping (Caterpillar) Dep. 17-20. Some of these employers utilize consultants to negotiate discounted rates for them, see Fowdur Tr. 1351-52, and then retain third-party administrators (“TPA”) to administer and adjudicate their employees' healthcare claims. Others work with national carriers to create and administer the network. Kendrick (Anthem) Tr. 1190-91.
Provider-Sponsored Plans: Similarly, some healthcare providers have created provider-sponsored insurance plans (“PSPs”) to cover their own large employee populations and then be available for purchase by outside groups. See, e.g., Parker (Indiana University Health) Dep. 21; Adams (Centra Health) Dep. 78-79, 83. One way to accomplish this is through a joint venture with a national carrier, and the Virginia hospital system, Inova Health, formed a provider-sponsored plan with Aetna called Innovation Health. Henderson (Innovation Health) Dep. 17-18.
Third Party Administrators: Some employers also look to third party administrators, or TPAs, to design plans and administer claims. Benedict (Cigna) Dep. 28-29. TPAs typically rent providers networks from insurers, including Anthem and Cigna. See Abbott (WTW) Tr. 117; Kertesz (Anthem) Tr. 583-84; Benedict (Cigna) Dep. 30-31.
Specialty Services. Finally, other entities identify a niche and focus on enhancing or replacing particular services that larger carriers offer as an aspect of their plans. For example, Castlight markets a “quality transparency tool” which allows “plan members to understand the cost of services that they're selecting, and the fact that there is price variation among providers, as well as variation in the quality of the outcomes.” Abbott (WTW) Tr. 214. It was one of the first companies to “synthesiz[e] that data and to create a consumer-friendly tool designed to better educate the patient or consumer on the variation and cost and potential variations and the quality of care.” Id. Other examples are Accolade and Quantum, two companies that offer concierge customer services. See DX 14 (Accolade is a “[n]iche total population care management carrier” that “performs case management and also advocates employers' turning off DM, nurse line, maternity programs, decision support, etc.”); Kertesz (Anthem) Tr. 637; Smith (Cigna) Tr. 786-87 (describing Quantum as a concierge model offering customer service and coaching).

         LEGAL STANDARD

         Section 7 of the Clayton Act prohibits mergers or acquisitions “where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition.” 15 U.S.C. § 18. “Congress used the words ‘may be substantially to lessen competition' . . . to indicate that its concern was with probabilities, not certainties.” Brown Shoe Co. v. United States, 370 U.S. 294, 323 (1962); see also FTC v. H.J. Heinz Co., 246 F.3d 708, 719 (D.C. Cir. 2001) (the government is not required to prove the alleged impact on competition “with certainty”). In essence, in a merger trial, the Court is making a prediction about the future. It must engage in a “comprehensive inquiry” into the competitive conditions that will exist in the market in question after the transaction, United States v. Baker Hughes Inc., 908 F.2d 981, 998 (D.C. Cir. 1990), and to meet their burden, plaintiffs must prove that anticompetitive effects are “sufficiently probable and imminent.” United States v. Marine Bancorporation, Inc., 418 U.S. 602, 623 n.22 (1974), quoting United States v. Cont'l Can Co., 378 U.S. 441, 458 (1964); see also Heinz, 246 F.3d at 713, quoting S. Rep. No. 1775 at 6 (1950) (the use of the words “may be” means the statute applies “to the reasonable probability of the pr[o]scribed effect” and not “the mere possibility”).

         In analyzing whether a transaction violates Section 7, courts in this Circuit apply the burden shifting framework set out by the Court of Appeals in United States v. Baker Hughes, 908 F.2d at 982.

         Plaintiffs bear the initial burden to prove that the merger would result in “undue concentration in the market for a particular product in a particular geographic area.” Baker Hughes, 908 F.2d at 982; Heinz, 246 F.3d at 715, quoting United States v. Phila. Nat'l Bank, 374 U.S. 321, 363 (1963) (“[T]he government must show that the merger would produce ‘a firm controlling an undue percentage share of the relevant market, and [would] result[] in a significant increase in the concentration of firms in that market.”'). This showing establishes a “presumption” that the merger will substantially lessen competition, Heinz, 246 F.3d at 715, and the burden then shifts to defendants to rebut the presumption. Baker Hughes, 908 F.2d at 982.

         If plaintiffs establish the prima facie case, defendants must present evidence to rebut the presumption by “affirmatively showing why a given transaction is unlikely to substantially lessen competition, or by discrediting the data underlying the initial presumption in the government's favor.” Id. at 991; Heinz, 246 F.3d at 715 (“defendants must produce evidence that ‘show[s] that the market share statistics [give] an inaccurate account of the [merger's] probable effects on competition' in the relevant market'”), quoting United States v. Citizens & S. Nat'l Bank, 422 U.S. 86, 120 (1975). The threshold the defendants must overcome to shift the burden back to plaintiffs is not high; the defendants are not required to “‘clearly' disprove anticompetitive effect, ” but rather to make “a ‘showing.'” Baker Hughes, 908 F.2d at 990-91, quoting Marine Bancorporation, 418 U.S. at 631. “But the ‘more compelling the prima facie case, the more evidence the defendant must present to rebut it successfully.'” Unites States v. Aetna Inc., No. 16-cv-1494, 2017 WL 325189, at *10 (D.D.C. Jan. 23, 2017), quoting Baker Hughes, 908 F.2d at 991.

         If defendants are able to make a showing that rebuts the presumption, “the burden of producing additional evidence of anticompetitive effect shifts to the government, and merges with the ultimate burden of persuasion, which remains with the government at all times.” Baker Hughes, 908 F.2d at 983; see also Kaiser Aluminum & Chem. Corp. v. FTC, 652 F.2d 1324, 1340 & n.12 (7th Cir. 1981); FTC v. Arch Coal, Inc., 329 F.Supp.2d 109, 116 (D.D.C. 2004) (plaintiffs “have the burden on every element of their Section 7 challenge, and a failure of proof in any respect will mean the transaction should not be enjoined”). Plaintiffs must prove the alleged Clayton Act violation by a preponderance of the evidence. United States v. SunGard Data Sys., Inc., 172 F.Supp.2d 172, 180 (D.D.C. 2001). But “section 7 does not require proof that a merger or other acquisition will cause higher prices in the affected market. All that is necessary is that the merger create an appreciable danger of such consequences in the future.” Id., quoting Hosp. Corp. of Am. v. FTC, 807 F.2d 1381, 1389 (7th Cir. 1986).

         ANALYSIS

         Plaintiffs allege that the merger of Anthem and Cigna will substantially lessen competition for the sale of health insurance, first to national accounts in a geographic market consisting of the fourteen Anthem states and in the United States as a whole, Compl. ¶¶ 19-37, and second, to large group employers in thirty-five local markets. Compl. ¶¶ 38-50. With respect to the national accounts market, the Court finds that each side has met its respective burden under the Baker Hughes framework. Plaintiffs have established a prima facie case that the merger is presumptively anticompetitive, defendants have introduced evidence to rebut the presumption, and plaintiffs have carried their ultimate burden of showing that the effect of this merger “may be substantially to lessen competition” in the market for sales to national accounts within the fourteen states. Therefore, the Court will enjoin the merger.

         I. Plaintiffs have met their initial burden to show that the merger is presumptively anticompetitive in the market for the sale of health insurance to national accounts within the fourteen Anthem states.

         A. The sale of medical health coverage to national accounts within the fourteen Anthem states is a relevant market.

         Because the ultimate determination of the legality of a merger involves an assessment of the new firm's market power, and the prima facie case concerns market concentration, “‘a necessary predicate' to deciding whether a merger contravenes the Clayton Act” is defining the relevant market. Marine Bancorporation, 418 U.S. at 618, quoting United States v. E.I. du Pont De Nemours & Co., 353 U.S. 586, 593 (1957). The relevant market consists of two elements: a relevant product market and a relevant geographic market. Arch Coal, 329 F.Supp.2d at 119; Brown Shoe, 370 U.S. at 324 (stating that the two factors are “a product market (the ‘line of commerce') and a geographic market (the ‘section of the country')”), quoting 15 U.S.C. § 18. A court may enjoin a merger based on proof of probable harm to any market alleged. United States v. Pabst Brewing Co., 384 U.S. 546, 549 (1966) (to prove a violation of Section 7, plaintiffs “may introduce evidence which shows that as a result of a merger competition may be substantially lessened through the country, or . . . that competition may be substantially lessened only in one or more sections of the country”).

         “Congress prescribed a pragmatic, factual approach to the definition of the relevant market and not a formal, legalistic one.” Brown Shoe, 370 U.S. at 336; see also Pabst Brewing, 384 U.S. at 549. This is because “[t]he ‘market, ' as most concepts in law or economics, cannot be measured by metes and bounds.” Times-Picayune Publ'g Co. v. United States, 345 U.S. 594, 611 (1953). Thus, plaintiffs' relevant market need not include all potential customers or participants. FTC v. Penn State Hershey Med. Ctr., 838 F.3d 327, 338-46 (3d Cir. 2016) (finding a geographic market definition correct even when 43.5% of a hospital's patients came from outside the defined market).

         Here, plaintiffs define the product market as the sale of commercial health insurance to national accounts with 5000 employees or more, and the complaint alleged a diminution of competition for the sale of that product in two geographic markets: the fourteen Anthem states and the entire United States.

         1.The sale of health insurance to national accounts with more than 5000 employees is a relevant product market.

         The relevant product market refers to the “product and services with which the defendants' products compete.” Arch Coal, 329 F.Supp.2d at 119. Since in defining the boundaries of the market, the Court is trying to answer the question of whether particular products “are sufficiently close substitutes to constrain any . . . anticompetitive pricing, ” H & R Block, 833 F.Supp.2d 36, 55 (D.D.C. 2011), a properly drawn market must include all products that are “reasonable substitute[s]” for, but not necessarily exactly the same as, defendants' offerings. FTC v. Cardinal Health, Inc., 12 F.Supp.2d 34, 46 (D.D.C. 1998).

         The Supreme Court set out the rules for identifying a relevant product market in Brown Shoe, and it started with the proposition that “the outer boundaries of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it.” 370 U.S. at 325. Both of these concepts relate to the availability of any reasonable substitutes, that is, “whether two products can be used for the same purpose, and if so, whether and to what extent purchasers are willing to substitute one for the other.” FTC v. Staples, Inc., 970 F.Supp. 1066, 1074 (D.D.C. 1997) (“Staples I”), quoting Hayden Publ'g Co. v. Cox Broad. Corp., 730 F.2d 64, 70 n.8 (2d Cir. 1984). Functional interchangeability refers to whether buyers view other products available to them as being “similar in character or use to the products in question;” in other words, are they suitable for use, even if they are not identical products. Id.; see also Brown Shoe, 370 U.S. at 325; Arch Coal, 329 F.Supp.2d at 119, quoting SunGard, 172 F.Supp.2d at 182. Cross-elasticity of demand incorporates price, convenience, and availability into the analysis and considers “the responsiveness of the sales of one product to price changes of the other.” E.I. du Pont De Nemours & Co., 351 U.S. at 400; see also, e.g., FTC v. Whole Foods Market, Inc., 548 F.3d 1028, 1037 (D.C. Cir. 2008). Simply put, if a substantial price increase of one product would cause purchasers to switch to a different product, and purchasers can do so easily and conveniently, the two products are considered to compete in the same market.

         Courts routinely turn to “practical indicia” as “evidentiary proxies for direct proof of substitutability.” Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 218 (D.C. Cir. 1986), quoting Brown Shoe, 370 U.S. at 325; see also FTC v. CCC Holdings Inc., 605 F.Supp.2d 26, 38 (D.D.C. 2009) (using these indicia to “augment the analyses of interchangeability and cross-elasticity of demand”). Following the Supreme Court's guidance in Brown Shoe, courts have reiterated that “the boundaries of a relevant market within a broader market ‘may be determined by examining such practical indicia as industry or public recognition of the [relevant market] as a separate economic entity, the product's peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors.'” H & R Block, 833 F.Supp.2d at 51, quoting Whole Foods, 548 F.3d at 1037-38. Within the category of practical indicia, defendants' business records are “strong evidence” for defining the relevant product market. Id. at 52-53; see also Whole Foods, 548 F.3d at 1045; CCC Holdings, 605 F.Supp.2d at 41-42; FTC v. Swedish Match, 131 F.Supp.2d 151, 162 (D.D.C. 2000); Cardinal Health, 12 F.Supp.2d at 49; Staples I, 970 F.Supp. at 1076. Courts also consider economic testimony and utilize the “hypothetical monopolist test” set out in the 2010 U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines (“Guidelines”) to ascertain whether the market has been properly defined to include all appropriate substitute products.[5]

         But a broad general market may contain smaller markets which separately “constitute product markets for antitrust purposes.” Brown Shoe, 370 U.S. at 325. Because the relevant product market in any particular case need only include “reasonable substitutes.” FTC v. Sysco Corp., 113 F.Supp.3d 1, 26 (D.D.C. 2015), the fact that a firm may be considered a competitor “in the overall marketplace does not necessarily require that it be included in the relevant product market for antitrust purposes.” Id., quoting Staples I, 970 F.Supp. at 1075; Cardinal Health, 12 F.Supp.2d at 47. The Merger Guidelines specifically caution that “defining a market broadly to include relatively distant product or geographic substitutes can lead to misleading market shares.” Guidelines § 4.

Market shares of different products in narrowly defined markets are more likely to capture the relative competitive significance of these products, and often more accurately reflect competition between close substitutes. As a result, properly defined antitrust markets often exclude some substitutes to which some customers might turn in the face of a price increase even if such substitutes provide alternatives for those customers.

Id. Courts have similarly recognized that “[m]arkets must be drawn narrowly to exclude any other product to which, within reasonable variations in price, only a limited number of buyers will turn.” Aetna, 2017 WL 325189, at *10, quoting Times-Picayune, 345 U.S. at 612 n.31.

         a. The proposed product market

         Plaintiffs maintain that the sale of commercial health insurance to national account customers is a relevant product market. They define a national account as an employer with 5000 or more employees, and their analysis of concentration in the market looks at both employers with 5000 employees and employers with 5000 employees spread over more than one state. Compl. ¶ 20; Dranove Tr. 877-78; Pls.' Proposed Findings of Fact: Phase I [Dkt. 416] ¶¶ 65-72. Defendants contend that this product market is invalid because: (1) there is no uniform industry definition for what constitutes a national account, (2) it is improper to combine ASO and fully insured plans into a single product market, and (3) and the threshold of more than 5000 employees used by plaintiffs' economics expert in analyzing the market is arbitrary and too large.

         Case law provides for the distinction of product markets by customer. Brown Shoe, 370 U.S. at 325, citing E.I. du Pont de Nemours & Co., 353 U.S. at 593-95 (“[W]ithin this broad market, well-defined submarkets may exist which, in themselves, constitute product markets for antitrust purposes.”); Guidelines § 3 (“When examining possible adverse competitive effects from a merger, the Agencies consider whether those effects vary significantly for different customers purchasing the same or similar products.”). A submarket exists when sellers can profitably raise prices “to certain targeted customers but not to others, ” in which case regulators “may evaluate competitive effects separately by type of customer.” See, e.g., FTC v. Staples, 190 F.Supp.3d 100, 117 (D.D.C. 2016) (“Staples II”) (recognizing “targeted” or “price discrimination” markets in antitrust law); Whole Foods, 548 F.3d at 1037-41 (upholding lower court's finding of a narrower market of core customers for premium, natural, and organic supermarkets rather than grocery store customers generally).

         b. National accounts are a unique set of customers with unique needs.

         There was considerable evidence presented to establish that there is a distinct type of large employer that is looking for an insurance plan that can deliver a national network, a high degree of plan customization, and sophisticated claims administration, customer service, and data reporting. A review of the wealth of practical indicia in the record shows that the industry universally recognizes that national accounts exhibit different needs and characteristics that drive the design and pricing of their products. As one industry consultant testified:

Large employers, certainly, are by nature more complex. They tend to have more locations, they tend to have more sophisticated requirements just by virtue of their size. Not necessarily so, but generally, they are looking for a broader portfolio of services. They're looking for that national network, and they are also looking for an ability to customize programs, often to a fairly substantial degree.

         Abbott (WTW) Tr. 76-78, 159; see also Sharp (Aon Hewitt) Dep.76-78 (large employers require customized solutions and benefit plans and may have different employee populations, such as union and non-union employees). As Anthem's former President of National Accounts, John Martie, explained, “national account purchasers tend to be more sophisticated and tend to appreciate greater levels of innovation.” Martie (Anthem) Dep. 84; see also Kertesz (Anthem) Tr. 535-37. By the end of the trial, it was crystal clear that just about everyone in the industry, certainly everyone within Anthem and Cigna, has a consistent understanding of exactly what a national account is.

         National accounts require carriers that can supply in-network providers in all of the locations where their employees live, work, and travel, and even where they may relocate as retirees. Cordani (Cigna) Tr. 404; Kertesz (Anthem) Tr. 538; Swedish (Anthem) Tr. 226; Martie (Anthem) Dep. 125; Mascolo (Wells Fargo) Dep. 65-66; Kidd (Sodexo) Dep. 20-21; Loring (Applied) Dep. 40-41; Record (Steel Dynamics) Dep. 30; see also Burnell (Buck Consultants) Dep. 112-13. The national network is critical; as Anthem's former head of national accounts testified, “you don't really call yourself a . . . national account carrier unless you can cover all 50 states.” Goulet Dep. 96.

         National accounts are also more likely to demand customized plans, technological platforms that enable employees to access claims information, data reporting so that the customers can understand and manage their healthcare costs, and in light of recent data breaches, sophisticated data security measures. See, e.g., Schumacher (United) Dep. 226-27 (for large, multi-state national employers “there's more customization . . . more interaction from the account management team and the support efforts”); Bierbower (Humana) Tr. 802 (national accounts typically desire “customized data files, customized plan designs, customized clinical programs”); Sharp (Aon Hewitt) Dep. 75-78 (large market clients with more than 5000 employees “tend to be requiring more customized solutions”); see also Abbott (WTW) Tr. 77-79, 159; Guilmette (Cigna) Dep. 73-74; Welch (Cigna) Dep. 25; Martie (Anthem) Dep. 161-62; Bailey (Cigna) Dep. 67-68; Parr (Cigna) Dep. 18-19; PX 94. In other words, national account customers demand an individualized, or differentiated, product.

         National accounts typically work with consultants to navigate the RFP and selection process used to purchase such a product. See, e.g., Pogany (Anthem) Dep. 34; Martie (Anthem) Dep. 52; Bailey (Cigna) Dep. 66-67; PK 94; Schumacher (United) Dep. 203-04, 228-29. Thus, they are sophisticated customers who bring the expertise of knowledgeable advisors to the task of procuring coverage for their employees.

         Furthermore, both brokers and carriers - including the merging parties - manage this segment separately from the rest of the 50 employee large group segment. Both Anthem and Cigna have established separate profit and loss centers for national accounts, with their own executives and separate marketing, sales, customer relations, and underwriting teams. See, e.g., Swedish (Anthem) Tr. 224-25; Cordani (Cigna) Tr. 404; Williams (Cigna) Dep. 23; Bailey (Cigna) Dep. 66-67; Guilmette (Cigna) Dep. 73-74; Hayes (Aetna) Dep. 24; PX 118 (Aetna document); Schumacher (United) Dep. 230; Jay (Anthem) Dep. 12, 15; Cheslock (Anthem) Dep. 20. Thus, the evidence strongly supports the conclusion that national account customers are a distinct subset of the health insurance market, with needs that differentiate them from employers on the smaller end of the large group spectrum.

         c. 5000 employees is an appropriate definition.

         Defendants can hardly contest the existence of a category of “national account” customers within the large group market, but they insist that there is no industry consensus for what the term means, “either as to the number of employees or their geographic spread.” Anthem's Phase I Pretrial Br. [Dkt. 324] at 6. So the next question to consider is whether plaintiffs' definition of national accounts as customers with more than 5000 employees is appropriate.

         1) Practical indicia support the definition.

         Here there is strong evidence coming from the merging parties themselves. The firms' own business records show that they each use the 5000 employee threshold to define their national accounts and manage their lines of business. PX 125 (Anthem SEC 10-K filing); PX 127 (Anthem website); see also DDX 88 (defense demonstrative exhibit listing the thresholds used by various carriers and TPAs to define national accounts). The CEO of Anthem testified that Anthem defines national accounts as multi-state employers with more than 5000 eligible employees. Swedish (Anthem) Tr. 225; see also PX 127 (at least 5% of employees must be ...


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