Michigan's Proposed Health Insurance Merger Stifled
Detroit-based health insurance provider Blue Cross Blue Shield’s Michigan branch, Blue Care Network was dealt a considerable blow by the Department of Justice today. Its planned merger with smaller health insurance provider Physician’s Health Plan of Mid-Michigan faced a hefty antitrust lawsuit by the DoJ itself should the merger have gone forward.
The result of the DoJ’s push to end the merger marks another victory for the Obama administration, as the President continues to campaign fiercely for health insurance reform. The uproar created by Anthem Blue of California’s decision to up rates for individual health insurance plans stoked the fire and once again made Obama’s reform plan a reality.
Similarly, Health and Human Services Secretary, Kathleen Sebelius lambasted Michigan’s own Blue Cross for similar practices. The health insurance provided reportedly requested to increase individual rates by as much as 56 percent, claiming that the dwindling pool of young healthy individuals left a costly void to fill.
Blue Care Network of Michigan owns a lion’s share of the Lansing market – nearly 70 percent. Physican’s Health Plan, on the other hand, can lay claim to a relatively smaller 20 percent portion of the market. The merger, first proposed in September 2009, would have resulted in Blue Cross’ owning of 90 percent of the Lansing commercial health insurance market.
Criticism abounded when the deal was first proposed. Of the dropped deal, the DoJ’s Christine Varney, who heads the antitrust division, remarked, “We welcome the decision…which will preserve competition among health insurance companies.”
Many feared the move would result in lower quality health care, increased premiums, and poorer service. Blue Care Network conversely argued the merger would have actually increased competition rather than quell it. The argument goes that a dominant health insurance provider would have more leverage to negotiate with larger hospitals and networks. Moreover, PHP’s provider network may have been more willing to accept other health insurance plans.
Blue Care dropped the merger to avoid further complications from a antitrust lawsuit, which would have been costly and slowed and real progress. For the Obama administration, the win means another step forward in health care reform.
In the meanwhile, Secretary Sebelius is maintaining pressure on other health insurance providers including WellPoint, Aetna, Cigna, United Health and Health Care Services Corporation. She wants the CEOs to publicly cite the reasons for their rate hikes. President Obama continues his health care overhaul crusade with speeches across the nation.