Consumer Groups Wary of Increasing Number of Insurance Mergers in California

The San Diego Union-Tribune on Sunday examined consumer advocates' opposition to health insurance company mergers -- particularly in California, where the effects are "pronounced."

In California, a few large insurers account for the majority of the health insurance market, and "further consolidations would have a major impact," the Union-Tribune reports. Last year, Anthem acquired WellPoint Health Networks, and UnitedHealth Group currently is seeking to acquire PacifiCare Health Systems.

In addition, Goldman Sachs analyst Matthew Borsch last week in a report suggested that Aetna might acquire HealthNet, both of which "have a significant presence in California," the Union-Tribune reports.

According to the Union-Tribune, insurers and investors "look favorably" on the mergers in part because they allow companies to expand their markets and product lines and because consumers are able to negotiate lower prices and access more providers.

Consumer groups argue that mergers reduce competitive pricing and consumer choice. Consumer groups also have said that remaining insurers might feel pressure to merge to compete with the larger companies.

Merger activity also might affect regional contracts that insurers will bid on under the 2003 Medicare law. The contracts will be available only to insurers who can cover the 26 regions determined by the federal government.

According to the Union-Tribune, California's approval of the UnitedHealth-PacifiCare merger "remains a wild card," in part because of Insurance Commissioner John Garamendi's (D) "vocal opposition" to previous insurer mergers. State and federal regulators must approve all mergers before they can move forward (Skidmore, San Diego Union-Tribune, 7/17).