• From the mouth of an insurer CEO

    A 2009 American Hospital Association paper expansively titled “The Case for Reinvigorating Antitrust Enforcement for Health Plan Mergers and Anticompetitive Conduct to Protect Consumers and Providers and Support Meaningful Reform” (whew!) includes the following quote from an unnamed U.S. Health CEO about it’s 1996 merger with Aetna:

    [We did the deal] to get the mass we needed, the power to negotiate with the physicians, hospitals, the drug companies and force down their charges.

    Nothing surprising about this. Just thought I’d give an insurer CEO equal time, having already posted quotes from hospital CEOs about market power.

    If the deal did what this CEO says it was intended to do–reduce provider prices–what happened to premium levels relative to what they would have been without the deal? The answer to this question is relevant to how we should think about increasing (or decreasing) market concentration in the insurance industry. It’s not always bad (or good) for consumers.

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    • Interesting you mention Aetna’s comments. It was all talk.
      Of course, Aeetna was almost ruined by this “swallowing the whale” called U.S. Healthcare. At this time their strategy was to maximize market share rather than current profitability. And they bought into managed care and all the provider control techniques and incentives for which U.S. Healthcare was known, and began to back away from the conventional underwiriting-based health insurance business for which Aetna was known. When managed care took the dive it almost killed the firm, causing their board to change management and strategy–going back to underwiriting with an intent to make a good profit on every contract they signed.