The flood of health insurance mega-mergers announced this year has various implications. David Balto, an antitrust lawyer at the U.S. Department of Justice, recently wrote a blog post in The Hill about the how these mergers could affect consumers.
"When it comes to health insurance, you don't need a PhD in economics to recognize the importance of competition," Mr. Balto wrote. "Higher concentration clearly means higher premiums." He cites a study by the National Bureau of Economic Research as well as a New York Times editorial, both of which warn against an increase in premiums after mega-mergers.
Supporters of the consolidation claim the mergers would be beneficial — Anthem CEO Joseph Swedish said a merger with Cigna would produce "acceleration of innovative and affordable health and protection benefits solutions" to customers. But Mr. Balto disagrees: "No study has yet to show consumers sharing the gains from increased efficiencies through health insurance mergers."
Mr. Balto highlighted the dire consequences of potential mega-mergers. High startup costs would assure that market forces won't correct competitive harm. Divestitures, which some see as a resolution, are not possible in areas where big insurers represent the majority of the market. If the mergers go through, the health insurers will face the same result as airlines when the industry consolidated, which included higher prices and weakened service.
Above all, Mr. Balto stressed the need for legislation to intently analyze the mergers. "If lawmakers should remember one thing, it is that Americans can't get healthcare without well-functioning health insurance markets," he wrote.