Varney: Health Insurance Deals Will Get a Close Look
By Aruna Viswanatha | May 24, 2010 11:54 am

The Justice Department’s top antitrust cop had a warning on Monday for health insurers: regulators will be looking closely at insurers that offer plans for individuals and small employers and will go after any deals that create or increase the size of a dominant plan in one of those markets.

DOJ's Christine Varney, head of the Antitrust Division. (photo by Ryan J. Reilly / Main Justice)

In remarks at a trade conference on antitrust in health care, Assistant Attorney General Christine Varney outlined the Antitrust Division’s priorities in light of the health care overhaul signed into law in March. The legislation creates a set of exchanges, where individuals and small businesses can compare prices and purchase insurance.

In order for those exchanges to work, Varney said, antitrust regulators need to police the markets to ensure there are enough choices on the exchanges.

According to an internal DOJ study, Varney said, new insurers have trouble competing with large players in certain markets because they can’t recruit new patients without provider discounts. It becomes a catch-22, she said, because they can’t negotiate for discounts without a large number of patients.

But in markets with a few medium-sized players, where no one plan has the clout to demand a larger discount, new firms are more likely to secure similar discounts, she said.

“It is, therefore, imperative that the division prevent mergers or acquisitions that will create, or even increase the size of, dominant health insurance plans, particularly in the small-group and individual markets,” Varney said.

The Justice Department will also challenge exclusive contracts between insurers and large providers that make it harder for the provider to negotiate with a new insurer, she said.

In her remarks at the conference, sponsored by the American Bar Association and the American Health Lawyers Association, Varney also advocated for a repeal of the McCarran-Ferguson Act, which exempts insurers from some federal antitrust scrutiny. The House overwhelmingly passed a partial repeal before health care reform became law, but it has stalled in the Senate despite Sen. Patrick Leahy (D-Vt.) efforts to include it in the financial regulation legislation the Senate passed last week. “I am hopeful that health care reform is not completely over on the legislative front,” Varney said.

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4 Comments

  1. [...] Main Justice: “According to an internal DOJ study, Varney said, new insurers have trouble competing with large players in certain markets because they can’t recruit new patients without provider discounts. It becomes a catch-22, she said, because they can’t negotiate for discounts without a large number of patients. But in markets with a few medium-sized players, where no one plan has the clout to demand a larger discount, new firms are more likely to secure similar discounts, she said. ‘It is, therefore, imperative that the division prevent mergers or acquisitions that will create, or even increase the size of, dominant health insurance plans, particularly in the small-group and individual markets,’ Varney said.” [...]

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