September 22nd, 2008

Recently, the Pennsylvania Insurance Dept. recieved a 192-page report from an independent health-economics consulting firm stating that competition, instead of a merger, of Highmark Inc. and Independence Blue Cross would create lower premiums and lower-costs for health service providers.  Today, the Philadelphia Inquirer editorialized that they couldn’t agree more with this report, which they call “basic economics and common sense.”

The editorial board isn’t buying the companies’ statements that they would never compete in eachothers’ areas anyway, so a merger only makes sense.  If they never planned to compete, where was there a need to sign a ten-year legal non-compete contract?  And why are they planning to merge only now when the non-compete has expired?

In addition, the Inquirer notes that if the Blues’ merge they would dominate 70 percent of Pennsylvania’s insurance market.  A recent study showed that premiums are 12 percent lower in areas where there is more competition and one company doesn’t control the market.

“Such a merger would further strengthen both of the Blues, raising the entry barriers against other insurers looking to come to Pennsylvania.

The two Blues already dominate their respective markets. While the two Blues provide many community benefits, a merger of these two giants would effectively create a statewide monopoly that would further curtail competition. The downside of that monopoly power far outweighs the meager benefits touted by the two Blues.”