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Reject the Highmark/Blue Cross Merger

SOURCE: AP/Matt Rourke

Pedestrians walk in front of the Independence Blue Cross headquarters in Philadelphia last year, while Pennsylvania's two largest health insurers met inside to decide whether or not to merge.

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CAPAF’s David Balto testifies before the Pennsylvania Senate Banking and Insurance Committee. Read the full testimony.

The proposed acquisition of Independence Blue Cross by Highmark will pose a significant threat to competition in the southeastern Pennsylvania health insurance market by eliminating Highmark as a potential entrant into the market. History has demonstrated that Highmark has the incentive and ability to enter into adjacent markets and that competition has benefitted employers, consumers, and providers. The antitrust laws protect not only ongoing competition, but also the potential competition that would exist but for this merger. Simply put this merger should be rejected by the Commissioner of Insurance or the Attorney General should challenge the merger.

The Proposed Highmark/Independence Blue Cross Merger

Today’s hearing evaluates the proposed Highmark Independence Blue Cross merger. The merger will combine the two largest health insurers in Pennsylvania and create a firm with over 8 million beneficiaries and $23 billion in revenue. The merger will create the largest insurer in Pennsylvania with over a 73 percent market share, far outdistancing the next closest competitor. Highmark is based in western Pennsylvania and IBC is based in southeastern Pennsylvania. Highmark also has operations in central Pennsylvania and has an ownership interest in Northeastern Blue Cross.

The most straightforward concerns are raised when firms are direct competitors. In this case, there is some evidence that Highmark and IBC compete directly, even though the commercial business of each appears geographically dispersed:

  • Both firms compete for certain Medicaid programs. In the Medicaid managed care market the parties admit that in the Lehigh/Capital zone Highmark and IBC subsidiaries are two of the three competitors with a market share of over 77 percent. These two firms are also direct competitors in the voluntary Medicaid managed care program in several counties.
  • Many employers in southeastern Pennsylvania must provide coverage in central Pennsylvania because their employees commute from central Pennsylvania.

The parties attempt to justify their merger based on two arguments: first, they argue that since there is no direct geographic overlap there is no loss in competition. Second, the parties suggest that there will be very substantial cost savings from the merger, which the parties have committed to pass on in the form of benefits for the community.

CAPAF’s David Balto testifies before the Pennsylvania Senate Banking and Insurance Committee. Read the full testimony.

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