Fueled to a large extent by the survival of the Affordable care Act in two United States Supreme Court challenges, and countless Congressional votes, the health insurance industry is set to further consolidate the major health insurance players from five to three as Anthem proposes to acquire Cigna for $48.3 billion dollars and Aetna seeks to acquire Humana for a mere $37 billion dollars. The argument is being made that consolidation in the health care insurance industry will help reduce costs and it is likely that it will.
The question remains as to whose benefit the anticipated cost reductions will adhere. Consolidation in the airline industry demonstrates that it tends to raise retail prices to consumers. Note that the dramatic cost reductions in the airline business due to the precipitous fall in fuel prices has not resulted in savings to consumers and it appears that the airlines have either colluded to keep inventory of seats limited or heave acted independently, but in concert to do so, which is as a practical matter far easier to do do when the field of competition is narrowly circumscribed in the first place.
Given the relative lack of value to the health care system provided by health insurers and the generous top line rake offs, it seems appalling to add another likely layer of “performance” bonuses to executives such as David Cardoni, CEO of Cigna, whose occasional $15,000,000. annual income cannot be reasonably justified based upon his service to his customers or his contribution to the industry, which averages at disappointingly low, “medical loss ratio”, compared to a signal payor system like Medicare.
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