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Friday, March 30, 2007
Huge
Health Insurance Merger
by Jerry Policoff
Independence Blue Cross of
Philadelphia and Highmark Blue Shield of Pittsburgh announced their
intention to merge yesterday, a move that would make them the third
largest health insurer in the United States and that would give them
control over more than 53% of the Pennsylvania insurance market.
The two companies say the
merger will be good for consumers because their combined resources
will allow them to hold down administrative fees, better manage drug
costs, and provide funds to help the state’s uninsured to get access
to health insurance.
Sounds good, but a study
released in 2006 (and other studies that reached similar conclusions
including one by the GAO), found that “more than 400 mergers among
health-care insurers in the past decade,” had reduced competition
but had not lowered costs. “As they've consolidated and presumably
eliminated duplicative functions, they're not passing the savings in
personnel and administrative costs on to consumers. Rate increases,
though slowing, are higher than ever and growing at a near
double-digit pace.” (Source:
York Dispatch)
“…The AMA says it has
taken up this antitrust issue with the U.S. Department of Justice but
says it has run into roadblocks with regulators. AMA officials say
regulators seem uninterested, even though government officials are
more than willing to target doctors' groups and hospitals on antitrust
matters.” (Source:
MarketWatch)
It is difficult to see how
this proposed merges, coming as it does at a time when insurance rates
are increasing at virtually twice the rate of inflation, serves the
people of the Commonwealth of Pennsylvania. It is also worth noting
that the two
companies maintain surpluses of over $4.2 billion. Isn’t it fair to
ask why costs are escalating at such an alarming rate when they are
sitting on these huge surpluses that increased by an average of 12%
last year?
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