Scrutinise mergers

TWO proposed mergers involving four of the biggest health insurers in the US could reduce competition in an important industry. That’s why federal and state regulators need to closely study these deals and, if necessary, force the companies to sell some parts of their businesses.

Earlier this summer, Anthem agreed to acquire Cigna for $48 billion, and Aetna announced a $37 billion takeover of Humana. The antitrust division of the Justice Department and state governments are reviewing the deals. If regulators approve both transactions, the number of big national health insurers would drop from five to three.

The companies say that being bigger will give them the ability to negotiate lower prices with hospitals, physicians and drug makers, and make health care more efficient. Not surprisingly, trade associations representing doctors and hospitals are not thrilled by that idea. They say these mergers will not only hurt them, but will hit consumers with higher premiums and other costs.

There is no doubt that insurers are trying to grow to get more leverage in negotiations with health care providers that have themselves become bigger in recent years. Many hospitals have bought up other hospitals and physician practices.

The Affordable Care Act wisely requires insurers to spend at least 80 percent of premium revenue on medical care, but that rule would not prevent them from charging higher premiums.

Some antitrust experts have raised another concern. The mergers could reduce the number of insurers competing on government-run exchanges set up under the health reform law. There is good evidence that having more insurers on an exchange tends to drive down premiums.

The Affordable Care Act has demonstrated that competition is good for consumers and taxpayers. Antitrust regulators must make sure that mergers in the health care industry do not reduce choices.