On July 21, the Department of Justice filed suit to block two mega health insurance mergers: Aetna’s purchase of Humana and Anthem’s purchase of Cigna. These mergers would have consolidated the five national insurers to only three, shaking up the healthcare landscape. At this critical moment for the healthcare system and antitrust policy, regulators made the right call – and their skepticism should apply to all healthcare mergers.
A large body of research finds that consolidation of insurers tends to increase premiums, while competition tends to lower premiums. For instance, in areas where Aetna currently competes with Humana, Aetna’s premiums are up to $300 lower than in areas where the two companies do not compete. Their merger would not only eliminate this current competition, but also foreclose any future competition between them in other areas and markets.
The above excerpt was originally published in The Guardian.
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