December 12th, 2008

Another vocal opponent to the Blues merger; Tom Knox — a businessman who formerly served as a healthcare company CEO, and is now considering running for governor in 2010 – recently spoke to the editorial board at Philadelphia’s The Bulletin.

Reports The Bulletin:

The Bulletin: Why do you believe the Blues merger will limit competition, and ultimately, lead to higher health-care costs?        

Tom Knox: Over 10 years ago, IBC and Highmark entered into an agreement not to compete with each other in their respective areas.  During the 10-year period of that agreement, both companies embarked on a pattern of activity whereby they built such a dominant market share in their respective regions that no one could enter the market and compete against them and they now have monopolies.  As a result, the cost of health insurance in their areas is higher than it should be or needs to be.  There is simply no pressure to control spending and to increase the efficiency of their operations.  In addition, they have used this market power to drive down the reimbursement rates paid to hospitals and other providers so that the providers are forced to charge much higher rates for the same services to all other payers and uninsured patients.

Highmark and IBC typically get discounts averaging 80 percent off of billed charges.  Aetna and United Healthcare, the two largest competitors are lucky to get discounts averaging 60 percent off of billed charges and everyone else gets an average of 20 percent off if they get any discounts at all.  This huge advantage has not only kept any competition from entering their regions, but also has diminished the market share of any existing competitors.  All of these practices and activities are anti-competitive and in my view constitute serious antitrust violations.  

If the proposed merger is allowed to occur, it would put the proverbial icing on this cake and complete what obviously was a well thought out strategy to build a monopoly that was concocted more than 10 years ago.  The culmination of this plan is to combine the two entities into a single company.  While there may be some economies resulting from this combination, past conduct would lead one to believe that there is no real intention to use them to lower the costs of their products and pass them on to consumers. 

The Bulletin spoke at length with Knox, who delivered a solid argument against the merger.  Read the rest of the conversation at their website.