Reprinted from Robert Reich Blog
The Supreme Court's recent blessing of Obamacare has precipitated a rush among the nation's biggest health insurers to consolidate into two or three behemoths.
The result will be good for their shareholders and executives, but bad for the rest of us -- who will pay through the nose for the health insurance we need.
We have another choice, but before I get to it let me give you some background.
A week before Aetna's announcement, Anthem disclosed its $47 billion offer for giant insurer Cigna. If the deal goes through, the combined firm will become the largest health insurer in America.
Meanwhile, middle-sized and small insurers are being gobbled up. Centene just announced a $6.3 billion deal to acquire Health Net. Earlier this year Anthem bought Simply Healthcare Holdings for $800 million.
Executives say these combinations will make their companies more efficient, allowing them to gain economies of scale and squeeze waste out of the system.
This is what big companies always say when they acquire rivals.
Their real purpose is to give the giant health insurers more bargaining leverage over employees, consumers, state regulators, and healthcare providers (which have also been consolidating).
The big health insurers have money to make these acquisitions because their Medicare businesses have been growing and Obamacare is bringing in hundreds of thousands of new customers. They've also been cutting payrolls and squeezing more work out of their employees.
This is also why their stock values have skyrocketed. A few months ago the Standard & Poor's (S&P) 500 Managed Health Care Index hit its highest level in more than 20 years. Since 2010, the biggest for-profit insurers have outperformed the entire S&P 500.
Insurers are seeking rate hikes of 20 to 40 percent for next year because they think they already have enough economic and political clout to get them.
That's not what they're telling federal and state regulators, of course. They say rate increases are necessary because people enrolling in Obamacare are sicker than they expected, and they're losing money.
Remember, this an industry with rising share values and wads of cash for mergers and acquisitions.