If an insurer refuses to compete in a certain market, is it still a potential competitor in that market?
The question keeps coming up as the pending merger between Highmark Inc. and Independence Blue Cross gets dissected in public settings.
Thursday's venue was Washington as Sen. Arlen Specter led a hearing on the consolidation of Pennsylvania’s health insurance industry. At two hours, it was the CliffsNotes’ version of what the state Insurance Department did over four days in July.
But it was no less illuminating to hear the Republican senator question the two CEOs as well as experts from the insurance and hospital industries about the effect on consumers.
Why don’t the two nonprofit health insurers compete in each other’s territory? Wouldn’t the competition be healthy in driving down premiums or at least holding back the rate of increase?
The insurers themselves tell us that they don’t want to battle each other, that it would be costly to do so.
Sam Marshall, president of the Insurance Federation of Pennsylvania, told the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights that allowing the combination would discourage other commercial insurers from making the investment to compete with them.
“Consumers can be harmed by the absence of the checks and balances and safety valves that come from a competitive market,” said Marshall, whose group represents commercial insurers.
Agreeing not to compete - as Highmark and Independence have done for more than a decade - would be unacceptable in auto insurance, for example. Why has it been tolerated in Pennsylvania?
Probably for the same reasons we tolerate going to state stores and state budgets passed at midnight. Some sides want things to change, other forces don’t.
Same with health insurance. Opponents see this deal as the last chance to bring change to the market.
Does anyone believe that if Insurance Commissioner Joel Ario turns down the merger, Highmark will start selling in Philadelphia?