Government Warns Insurers About Merger Activities

In a stern warning issued to the health insurance industry, an Obama administration official says that the government won’t hesitate to block mergers that threaten to stifle competition. During a conference with the American Bar Association and the American Health Lawyers Association, Christine Varney, the Justice Department’s antitrust chief, said that enforcement of antimonopoly laws is vital to the success of the new health care law, especially in trying to control rising premiums.

Varney said that the antitrust division “is committed to vigorously, but responsibly, scrutinizing mergers in the health care industry that appear to present a competitive concern.” She added that if the department’s concerns are well founded, “we will not hesitate to block the merger or to require the settlement concessions necessary to protect consumers.”

The government’s scrutiny will not stop at insurers, however. Varney also put hospitals on notice that the government will investigate hospital mergers that are likely to reduce competition.

In typical finger-pointing fashion, groups representing doctors and consumers have protested mega mergers of insurers, blaming consolidation for rising costs. Insurers counter that larger companies save money by being more efficient administrators, and they fault doctors and hospitals for driving up medical costs by ordering too many tests and performing too many procedures.

Varney provided an example of the Justice Department’s strategy in a case study involving a recent merger proposal in Michigan between Blue Cross Blue Shield of Michigan and Physicians Health Plan. The Blues plan controls nearly 70 percent of the market, and Physicians has 20 percent. Varney noted that the competition between the two companies had led them to offer lower prices, better service, and more innovative products. In contrast, the merger would have given the Michigan Blues the ability to control physician payment rates “in a manner that could have hurt the quality of health care being provided.”