via Wall Street Journal

Anthem’s proposed merger with Cigna following Aetna’s acquisition of Humana has set off alarms about lack of competition in the health-insurance industry. But policy makers should consider the potential benefits of industry consolidation. The greater efficiency and market power of larger insurance plans could lower prices for consumers by offsetting the bargaining power of health-care providers.

In many U.S. communities there are only one or two hospitals, which dictate the cost of care. A recent report by Kaufman, Hall & Associates LLC showed that the number of hospital mergers and acquisitions increased 44% between 2010 and 2014. There is a similar problem with specialist physicians who, through consolidation of practices, control of entry and other arrangements, have considerable market power.

Insurance companies can act as a counterweight, and lower prices will get passed along to consumers instead of increasing insurance-company profits. That’s because the Affordable Care Act requires insurers to spend at least 80%-85% of every premium dollar on consumer medical claims and activities that improve the quality of care..

To read the full article CLICK HERE