From a cartel to a monopoly. Thanks Obamacare!

There are currently 5 health insurers that dominate the market for health insurance: Aetna, Anthem, Cigna, Humana, and United Healthcare.  This cartel is a big reason why healthcare costs skyrocketed before the Patient Protection and Affordable Care Act was passed into law forced upon American citizens.  But if you think your health insurance premiums are high now, you ain’t seen nothing yet:

Many observers say they believe that the industry is due for a substantial round of consolidation. The Wall Street Journal recently added fuel to the speculative fire with a report that mammoth insurer Humana — with a market capitalization of $31.5 billion — is exploring a potential sale with the help of Goldman Sachs. Possible bidders include Aetna and Cigna.

***

FTI Consulting managing director Jim Toole said consolidation in the health insurance industry has been on hold since 2011 in part due to the unfavorable state of the economy but mostly because of the questions and concerns surrounding the Affordable Care Act. As health insurance stocks have gained more favor, these companies likely have surplus levels of cash on hand to use on acquisitions, Toole said.

***

There have been clear signals in the marketplace that consolidation among the big five is in the offing, Toole suggested. “It looks like there is going to be a little dance, and Humana may be the first on the floor,” he said.

Toole added that the most logical acquirer for Humana is Anthem, as the insurers’ operations complement each other. Humana has a large Medicare population, whereas Anthem does not, Toole explained. Anthem performs well in the exchange market; Humana does not.

Aetna could be a secondary logical bidder for Humana, he said. And Cigna is smaller than Humana, and so a combination of the two companies might be pitched as a merger-of-equals, Toole explained, which may not be what Humana is looking for. The company is likely looking for bigger, stronger partner.

If Humana were to be acquired by Aetna or Anthem, Cigna could be targeted next, he said. Aetna could be a logical acquirer for Cigna, Toole said, adding that both companies are based in Connecticut. A deal between neighbors could present challenges above and beyond traditional antitrust scrutiny, Toole added.

Right now, the health care insurance market is a cartel.  Cartels exist to restrict entry and set the price of a good or service at the monopoly price.  If effect, a cartel is a monopoly in everything but name.  And monopolies are known to result in a high market price and low level of supply of a good or service.

Never mind the fact that such consolidation is (technically) illegal in the United States.  You see, back in the late 19th century Congress passed the Sherman Antitrust Act, which

prohibits certain business activities that federal government regulators deem to be anti-competitive, and requires the federal government to investigate and pursue trusts.

It has since, more broadly, been used to oppose the combination of entities that could potentially harm competition, such as monopolies or cartels.

***

In 19th century America, the term “trust” was synonymous with monopolistic practice, because the trust was a popular way for monopolists to hold their businesses, and a way for cartel participants to create enforceable agreements.

Of course, the modern Congress has abdicated almost all of it’s responsibilities for protecting American citizens from such unscrupulous and illegal activities.  Why should the health insurance market be any different?

And if you’re looking for the Supreme Court or the Republicans to overturn Obamacare, forget it.  I fully expect the Supreme Court to rule that the Obamacare subsidies have to stay, because otherwise millions of Americans will lose their health insurance.  After all, this is the same group of black-robed clowns who ruled that the government can force you to buy something.  And that a tax isn’t a tax.

The irony is that Roberts didn’t have to rewrite the statute in order to issue a judicially minimalist opinion. He could have done what the Obama administration asked him to do: if the individual mandate is unconstitutional under the Commerce Clause, also sever the law’s guaranteed-issue and community rating provisions, and leave the rest of the law intact.

Instead, he invented out of whole cloth a new definition of taxation that contravenes long-standing precedent. He added hundreds of billions of dollars to the federal deficit, by way of his Medicaid ruling. And he forever tarnished his legacy as a Justice, and his promise to the nation that he would serve as an umpire, and “remember that it’s my job to call balls and strikes, and not to pitch or bat.”

It should never have gone all the way to the Supreme Court.  All it would have taken to stop the passage of the PPACA back in 2010 was for one Republican Senator to put a hold on the bill.  That’s right, Senators have the power to stop bills from coming to the floor for a vote.  If the Republicans didn’t stop the bill back then, what makes you think they will do anything about it five years later?

 

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Categories: Bastards, Econ 101, Healthcare, Killing the economy, Obamacare

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