As the White House and Congress make a final push to overhaul the nation’s health care system, the Justice Department claimed a small victory on Monday when Blue Cross Blue Shield of Michigan said it would drop its proposed plan to purchase another Michigan insurer, the Physicians Health Plan of Mid-Michigan. Blue Cross cited the threat of a lawsuit from the DOJ in announcing it had abandoned the deal.
The acquisition would have given Blue Cross control of 90 percent of the health insurance market in Lansing, Mich., the DOJ said.
“We welcome the decision by Blue Cross-Michigan and Physicians Health Plan of Mid-Michigan to abandon their deal, which will preserve competition among health insurance companies in Lansing,” Assistant Attorney General Christine Varney said in a statement. “The merger would have likely led to higher prices, lower levels of service and decreased quality of health care for consumers.”
The companies had argued the deal would let them spread administrative costs over a larger member pool and help bring health care costs down.
Observers applauded the Justice Department’s decision to block the deal.
“They never really just said no to a health insurance merger before,” said David Balto, a fellow at the Center for American Progress, in an interview. ”The record is becoming clearer that mergers haven’t led to more efficiencies but rather increased premiums and led to a larger number of uninsured.”
A recent American Medical Association study found that the market for health insurance in 96 percent of cities was highly concentrated, but experts disagree to what extent such concentration was the effect of weak antitrust enforcement.
Recent mergers have often included a buyer that had little presence in the local market and therefore did not raise serious antitrust concerns, said Alwyn Cassil, who heads public affairs at a non-partisan think tank, the Center for Studying Health System Change.
Concentrated health insurance markets aren’t primarily a function of mergers, Cassil said, but owe more to the fact that regional health plans and provider-owned plans have largely disappeared.
Having a dominant insurer can indirectly help consumers, Cassil said, because they can negotiate with large hospitals and provider networks.
A 1940s law shields the “business of insurance” from federal antitrust laws, but insurance mergers still undergo a review by the Justice Department. A repeal of the law, the McCarran-Ferguson Act, has taken center stage on Capitol Hill after broader health care legislative efforts stalled. The House passed the antitrust measure on Feb. 24 as a stand-alone bill. The Senate has yet to act on the legislation.