The state Senate Banking and Insurance Committee appears poised to recommend rejection of a proposed merger by Pennsylvania's two largest Blue Cross health insurers. That would be best.
It isn't easy to stand up to the politically powerful Blues - Blue Cross of Philadelphia and Highmark Inc. of Pittsburgh. But it's the right move for consumers, who would benefit too little from the deal as it is currently structured.
State Insurance Commissioner Joel Ario will have the final say. But a recommendation by state lawmakers to reject the deal would make it difficult for Ario to approve it.
Under legislation passed after the proposal was announced in March 2007, the lawmakers have until Nov. 28 to weigh in, if they choose. The House insurance committee will meet today, but is not expected to make a recommendation. The Senate committee meets Thursday. There is speculation that the legislators might recommend approving the merger, if some strong conditions are added. If the deal isn't right for consumers, it should die.
Senate Banking and Insurance Committee chairman Donald J. White (R., Indiana) is an insurance broker, and has voiced skepticism that the merger will provide any long-term benefits for consumers.
Anyone should be able to see that consolidating the state's two giant health insurers into a virtual monopoly would weaken competition. Just look at basic economics.
Combining Independence Blue Cross, which dominates the Philadelphia region, with Highmark, which dominates the Pittsburgh region, would create a behemoth whose claws grip nearly 70 percent of the state's health-insurance market.
Such dominance would frighten potential competitors from even thinking about entering or expanding in Pennsylvania. As a result, hospitals, doctors and employers in this state would remain at the mercy of an even bigger insurance giant.
The Blues have already been passing along double-digit rate increases to consumers for several years. Without the threat of any competition, the likelihood of future rate increases would grow even larger.
The Blues argue that premium increases are driven by higher costs due to advances in technology and added medical tests by doctors and hospitals. But without real competition, there is little impetus for insurers or health-care providers to reign in costs or increase efficiencies.
One study found that premiums are 12 percent lower in markets where an insurer doesn't dominate the market. But the proposed Blues merger would move the state and the region in the opposite direction by chasing away potential competition.
The Blues say the merger will generate $1 billion in savings over six years, help stabilize prices for subscribers, and expand coverage for the uninsured. But they admit any impact on premiums would be minimal. If consumers are going to receive little or no relief and competition is going to be weakened, who would benefit from the merger beyond the Blues' coffers? Lawmakers shouldn't be a party to that.