Health Insurance Providers Face Scrutiny Due to Upcoming Mergers

Competition is a major key for keeping product prices low. When that competition is removed, whether by government interference or as a natural effect of the free market, a single company or small group of companies can effectively gain a monopoly on the supplies of a specific type of good or service, which would give them the ability to charge as high a price as they want. It is that situation that many individuals fear may occur in the health care industry. Chad Terhune, of the Los Angeles Times, describes in his article the various mergers currently in the works between health care providers, and the effects that these mergers, if successful, could have on the average American.

For employers and employees alike, these mergers could have huge effects. If all of the pending mergers are approved, then three companies will have control of the majority of the healthcare market, which could lead to a forcing-out of smaller, competing businesses, which could grant them more control. Currently, the companies have the following goals: Anthem Blue Cross Inc. aims to buy out Cigna Corp. for $54.2 billion, Aetna Inc. wants to take over Humana for $37 billion, and the smaller company Centene is looking to acquire Health Net Inc. for $6.8 billion. In the end, Anthem, Aetna, and United Health Group could be at the top of the industry, in California at least.

Many opponents to these mergers fear that the benefits that these health care providers receive by expanding will not be passed on to consumers. In fact, they fear that the new power earned by the companies might lead them to increase rates, forcing customers to pay more or try to find an alternative provider, which would be quite difficult to accomplish in a short time period. They also want to make sure that these large companies have restrictions and extra rules making them focus on improving patient care. Partly in response to the issues raised by opponents, the Department of Justice is having anti-trust officials investigating each of these deals, but in general, state approval determines the end result.

States tend to put the most regulations on the health insurance market. So, in the end, it is usually up to your specific state to decide what conditions the merging companies will have to meet, including holds on premium increases and general network standards. There are, however, existing issues in the system, involving a patient's ability to get insurance at all, as well as the affordability of the patient's final choice. Often, health insurance providers will set a limit on the amount of coverage they will provide to specific patients, depending on the patients' health and medical history. In some instances, this can actually help the common customer. For example, Anthem at one point declared that it would provide a maximum of $30,000 in coverage for knee and hip replacements. Because of this limit, customers were forced to shop around to find a medical practice that would do the procedure for a lower price, which forced about 20% of hospitals to lower prices so as to not lose the business.

Proponents of the mergers hope that similar situations will occur in the future of the health insurance industry. They hope that, as the companies gain more control, they will be able to force medical providers to lower prices to keep the demand constant. They expect that consumers will see a lowering of overall costs, both to hospitals and to the insurance providers as well. For now, there is no real way to determine definitively whether the mergers will be positive or negative for the common American. In all likelihood, the mergers will be approved by the Department of Justice. So, these three companies will almost definitely become the leaders in the industry. The only question might be the level of restriction placed on these companies by each state.

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Major Theater Chains Face Investigations Into Anti-Trust Violations

4/17/15 - Competition is a necessary part of economics. Without competition, a company or group of companies could gain control of a market and charge outrageous prices for goods and services, against which consumers may have no recourse. When competitors arise, such companies are forced to lower prices since consumers will be able to choose. As supply increases, prices must decrease, or the companies risk allowing demand to decrease.

A monopoly is when a single company gains complete control of a market or commodity. A cartel is when a group of companies have control over the market and agree among themselves on what prices to set. A trust is a group of companies that work together to force other, usually smaller, companies out of the market. Each of these is regulated by the federal government and is prevented as much as possible, so as to allow smaller companies the ability to be economically competitive. In his article, Richard Verrier looks into recent investigations into anti-trust violations by several major movie theater chains like AMC, Regal, and Cinemark.

Many complaints and lawsuits have been filed over the years by owners of smaller theaters, who claim that the major theaters have been involved in a practice called “clearance,” in which the smaller theaters are prevented from playing newly released movies. Is this practice considered a violation of anti-trust laws, though? While a Supreme Court decision in 1948 required that movie studios give up ownership in movie theaters, larger theaters still have the financial clout necessary to have some control over where popular movies will be played first.

Thus, the Department of Justice's anti-trust division has been spurred into action in an attempt to determine if clearances are against federal law. To the large chains, it's simply a matter of economic reasoning. The film studios have the supply, and the movie theaters have the demand. If a company like AMC wants a specific movie from the studio, it will effectively be providing more revenue to the studio, because the purchase of the film will involve hundreds of theaters across the country, while the purchase by a small company like IPic Entertainment will only involve a dozen or so. The studio will be more willing to give in to AMC's requests, because AMC provides more business.

With the Department of Justice on the case, we can assume that the matter will eventually be settled. The conclusion of this argument, however, could mean big things for small businesses. If the DoJ concludes that the major theater companies are not breaking any laws, then the small companies will be at a distinct disadvantage. If the DoJ rules that the major companies are breaking anti-trust laws through the use of clearances, then governmental entities may get more involved in economic issues that are out of their jurisdiction. What will it come down to: the natural order of economics, or the imposed order of government regulation?

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