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Justice Department stops health merger

Nancy Marshall-Genzer Mar 9, 2010

Justice Department stops health merger

Nancy Marshall-Genzer Mar 9, 2010


Kai Ryssdal: As the health care debate gets ever closer to its endgame, the Obama administration is getting a bit tougher on health insurance companies. The Department of Justice has blocked the merger of two Michigan insurers, as Marketplace’s Nancy Marshall Genzer reports.

NANCY MARSHALL GENZER: President Obama has made health insurance companies out to be public enemy number one as he pushes for his health care overhaul. So it was no surprise when the Justice Department threatened an antitrust lawsuit to block the merger of Blue Cross Blue Shield of Michigan with another insurer, Physicians Health Plan of Mid- Michigan.

The timing couldn’t have been worse.

LES FUNTLEYDER: Somebody should have thought about this ahead of time.

Les Funtleyder is a health care strategist at Miller Tabak.

FUNTLEYDER: Sometimes you can have a tin ear to the environment when it seems like a good business move.

And it would have been a nice move for Blue Cross Blue Shied of Michigan. The deal would have given Blue Cross almost 90 percent of the health insurance market in the other insurer’s hometown, Lansing. A market share that makes federal regulators cringe.

Austin Frakt is a health economist at Boston University.

AUSTIN FRAKT: The vast majority of insurance markets are considered very concentrated. And that’s generally viewed as a threat to the welfare of consumers.

So why did Blue Cross of Michigan even try for the deal?

Erik Gordon is an economist at the University of Michigan. He says nonprofit Blue Cross felt it had no choice.

ERIK GORDON: The Blue’s sense of it is that we compete with the giant for-profit companies. We have to get to the size where we have the same cost efficiencies that these other people have.

Gordon says, for Blue Cross of Michigan, getting bigger meant getting that 90 percent market share — a breaking point for federal regulators.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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