Hearing

Acting Insurance Commissioner Testifies on Blues Merger

Highmark and IBC would control more than half of insurance market

The Senate Banking and Insurance Committee today (October 23) held a public hearing to hear testimony from Acting Insurance Commissioner Joel Ario regarding the status of the proposed merger between Highmark Inc. and Independence Blue Cross and the dominant role these companies currently hold in Pennsylvania.

"This hearing provided the Banking and Insurance Committee with a sound basis upon which we can examine the state of health care coverage in the Commonwealth and what it may evolve in to if the merger of Highmark and Independence Blue Cross moves forward," said Senator Don White, Chairman of the Senate Banking and Insurance Committee. "Certainly, it is clearer now that Pennsylvania is already looking at very limited competition in the health care insurance industry since a handful of companies already hold about 88 percent of Pennsylvania's insurance market.

"Highmark and IBC each possess a quarter of the insurance market in their own right. Combined, they would control more than half of the shares. If this merger is approved, Pennsylvania could become even less competitive, which could impact the cost and quality of health care in the Commonwealth," Senator White continued.

Information provided by Ario to the Committee included:

Between 2000 and 2006, health care insurance premiums rose 75.6 percent, while inflation went up 17 percent and median wages increased 13.3 percent.
Pennsylvania's health care insurance market can be broken into four tiers:
- Highmark (26.79 percent market share) and Independence Blue Cross (26.49 percent) are top tier with a combined 53 percent of the market.
- Four groups, each with about 5-6 percent of the market, make up the second tier, with a combined quarter of the market.
- The third tier is made up of five groups, each with 2-3 percent of the market shares.
- The remaining 12 percent of the market is covered by more than 700 insurers, each with less than 1 percent of the market.
The Department of Insurance expects to wrap up its review of the for-profit subsidiary filings by Highmark-IBC in the summer or fall of 2008. The Department can reject those filings if any one of seven standards are violated, including: if the merger "would substantially lessen insurance competition in the Commonwealth or tend to create a monopoly;" if it would "jeopardize the financial stability of the insurer or prejudice the interest of its policyholders;" or, if the transaction "is likely to be hazardous or prejudicial to the insurance buying public."

Contact:

Joe Pittman
(717) 787-8724