(Adds Anthem CEO testimony, closing share prices)
By Diane Bartz
WASHINGTON, Nov 21 (Reuters) - Anthem Inc and the U.S. Justice Department dug in their heels on Monday in court over whether the lower prices the health insurer expects to negotiate after buying smaller rival Cigna Corp are an efficiency that benefits customers or an antitrust violation.
In the first phase of what could be a two-stage trial, a lawyer for Anthem argued that the $45-billion deal, which was announced more than a year ago, would create a new, bigger insurer with the power to push down prices that it would pass onto customers.
But the Justice Department argued that any cost cuts would come from Anthem using its clout in the market to force hospitals and doctors to work for less.
"Efficiencies don't count if the only way you get them is more market power," the Justice Department's attorney Jon Jacobs said in opening statements.
Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia may opt to block the proposed deal if she decides it will mean higher prices for consumers or that it hurts suppliers. The Justice Department asked her to declare the deal illegal under antitrust law.
The Justice Department's Jacobs argued that the deal would also lead to fewer companies selling health insurance to big, nationwide employers that need a broad network of services.
Fewer companies usually means higher prices for these big companies, and Anthem's lawyer Christopher Curran took issue with that idea. "The notion that these Fortune 500 companies are going to be victimized here ... is not realistic," Curran said in court.
Curran also argued that the Justice Department had failed to consider the new online private exchanges where corporations allow employees to choose from multiple insurers.
Judge Jackson noted that the major insurance companies were the ones in the exchanges and asked: "How's that the answer to the problem?"
The Justice Department's Jacobs noted the tough competition between the companies, referring to an Anthem document. "It offered its sales force a bounty if they took business away from Aetna or Cigna," said Jacobs.
The trial is expected to end by the end of the year.
The Justice Department filed lawsuits on July 21 asking a federal court to stop the $45-billion purchase of Cigna and Aetna Inc's $33-billion planned acquisition of Humana , arguing that such consolidation among the largest health insurers would be anti-competitive.
Anthem attempted to make the case that it was not truly a national insurance company because it is only in 14 states.
Joseph Swedish, chief executive of Anthem, the largest member of the Blue Cross Blue Shield Association, testified that he would be inclined to assist another so-called blue plan land a national contract in a way it would not help one of the other major companies.
"If a blue plan reaches out to me to give help, I'll give help," Swedish said.
Anthem shares closed up 1.5 percent at $137.36, while Cigna shares fell 1.2 percent to close at $137.08.
Reporting by Diane Bartz, writing by Caroline Humer and Diane Bartz; Editing by Nick Zieminski, Bernard Orr