Advertisements

ObamaCare’s Oligopoly Wave

obamcare-insurance-consolidation-getty-images

Bigger insurance, bigger medicine, and a health consolidation frenzy

The five largest commercial health insurers in the U.S. have contracted merger fever, or maybe typhoid. UnitedHealth is chasing Cigna and even Aetna Humana has put itself on the block; and Anthem is trying to pair off with Cigna, which is thinking about buying Humana. If the logic of ObamaCare prevails, this exercise will conclude with all five fusing into one monster conglomerate.

“The danger is that ObamaCare is creating oligopolies, with the predictable results of higher costs, lower quality and less innovation.

This multibillion-dollar M&A boom is notable even amid the current corporate-financial deal-making binge, yet insurance is only the latest health-care industry to be swept by consolidation. The danger is that ObamaCare is creating oligopolies, with the predictable results of higher costs, lower quality and less innovation.

ObamacareHospital2

“More important, the economics of ObamaCare reward scale over competition. Benefits are standardized and premiums are de facto price-controlled.”

The business case for the insurance tie-ups among the big five commercial payers, which will likely leave merely three, is straightforward. Credit is historically cheap, and the insurers have built franchises in different areas that could be complementary. As for antitrust, selling coverage to employers doesn’t overlap with, say, managing Medicaid for states. (Expect some of the Blue CrossBlue Shield nonprofits to hang for-sale signs soon for the same reasons.)

obamacare-signing

More important, the economics of ObamaCare reward scale over competition. Benefits are standardized and premiums are de facto price-controlled. With margins compressed to commodity levels, buying more consumers via mergers is simpler than appealing to them with better products, to the extent the latter is still legal. Read the rest of this entry »

Advertisements

Rules are for the Little People: Lawmakers’ Health Plan Perks Dipped in Gold

BENEFITS

Robert Pear writes:  Members of Congress like to boast that they will have the same health care enrollment experience as constituents struggling with the balky federal website, because the law they wrote forced lawmakers to get coverage from the new insurance exchanges.

That is true. As long as their constituents have access to “in-person support sessions” like the ones being conducted at the Capitol and congressional office buildings by the local exchange and four major insurers. Or can log on to a special Blue Cross and Blue Shield website for members of Congress and use a special toll-free telephone number — a “dedicated congressional health insurance plan assistance line.”

And then there is the fact that lawmakers have a larger menu of “gold plan” insurance choices than most of their constituents have back home.

While millions of Americans have been left to fend for themselves and go through the frustrating experience of trying to navigate the federal exchange, members of Congress and their aides have all sorts of assistance to help them sort through their options and enroll.

Read the rest of this entry »