DOJ Threat Ends Michigan Health Insurance Deal
By Aruna Viswanatha | March 9, 2010 8:52 pm

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.

Balto, who has championed a repeal of the exemption from some federal antitrust scrutiny that insurance companies enjoy, said the action showcased a more aggressive DOJ. “It shows it’s going to be tougher for insurance mergers to go through the Department of Justice,” he said.
Others pointed out that the outcome was inevitable because health insurers are in the hot seat with health care legislation still on the table.
“It is an unsurprising, indeed quite expected, outcome. In this environment it was  unrealistic to think the Justice Department was going to take a pass on a merger of that size,” said Stephen Calkins, a professor at Wayne State University Law School in Detroit. “The Blue Care Network’s apparent argument that it was too small to achieve efficiencies was unlikely to prove persuasive to the Justice Department.”

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.

The attorney general in Michigan, Mike Cox, who has been a vocal critic of Blue Cross practices in the state, worked with the Justice Department on the review.

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.

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8 Comments

  1. JourneyHome says:

    McCarran-Ferguson was originally designed to empower both the federal government and the individual states so that they could act to prevent insurance companies from becoming abusive monopolies.

    How ironic that it has instead enabled the health insurance industry to achieve exactly the opposite result because the federal government has chosen not to pass legislation targeting insurance monopolies and the states have, for the most part, shirked their regulatory responsibilities.

    States haven’t gone after obvious Health Care Monopolies because their budgets are stretched too thin and their pockets aren’t anywhere deep enough to challenge the national and trans-national corporations.

    All 50 States need to bring legal action collectively and the Federal Government needs to join the suit.

    Allegations of price-fixing, bid-rigging, exclusive sales contracts, local price cutting to freeze out competitors, and the dividing up of markets need to be full explored so we can get rid of our dysfunctional corporate health care system that’s choking the economy to death.

    On a macroeconomic scale it would return money to “our” pocketbooks and be more profitable for America. Less money out of our paychecks going to Joe Lieberman and Ben Nelsons friends at Well Point would be a boom for the economy. It would enable an increase in savings and investing as well as spending.

    Our money is being horded by the few to the detriment of the overall market place. That money needs to be returned to the tax payers in mass and available to stimulate the economy across a broad sector of markets as a whole versus the gain of a few Senators from Aetna named Lieberman and Nelson and the hysterically wealthy and tone deaf CEO’s they greedily represent.

    It’s time to sue the Insurance companies regardless of the Healthcare Bill that Passes.

    Paul Burke
    Author-Journey Home

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