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HEALTH PLANS: More tittle-tattle about WellPoint

Just to add onto all the fuss about Wellpoint’s merger with Anthem, California’s biggest newspaper The LA Times has a none too glowing analysis of the motives behind the merger. The point it hints at but doesn’t really follow through explaining is that both Wellpoint and Anthem have both kept their expansions to buying up other for-profit Blue Cross plans. As there’s usually only one Blues plan per state the newly merged company will be bigger nationally but not regionally. The region (or enlarged metro area) is of course where the power plays between plans and providers work themselves out. So in that sense the LA Times article is right, in that there’s no compelling economic rationale for the merger, other than to create a national company that can have the scale of a United or an Aetna. In some ways we are moving back to the big 5 insurers that were the "national" players in the 1980s, only that instead of Aetna, Travelers, Met, Cigna and the one I forgot (oh, yeah; Prudential), it’s United, Humana, Anthem/Wellpoint, and Aetna (albeit an Aetna that’s gone through many changes).

However, because health care contracts are regional, a national presence still isn’t that important in health care. So the lack of rationale for the merger also means there’s no national rationale for the FTC or anyone else to stop it. My sense is that once some of the more egregious pay-outs are scaled back, it will still go ahead. Wall Street seems to agree in that Wellpoint’s stock is still nearly 30% higher than it was when the merger was announced back in October last year .

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