Yesterday, the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing on “Examining Consolidation in the Health Insurance Industry and Its Impact on Consumers,” at which the CEOs of Anthem and Aetna testified. Both of these health insurers have announced friendly take-overs of two other insurers, Cigna and Humana.
One indicator regulators use to determine whether a business combination will reduce competition is whether there are significant barriers to entry in the industry. If there are, new competitors will not exploit openings created by incumbents’ consolidation. During the hearing, the CEOs of Anthem and Aetna each (independently) pointed to Oscar, a new health insurer with highly pedigreed investors, as evidence that health insurance is an easy business to enter.
Oscar is indeed an interesting enterprise, which has attracted fawning coverage in the business press both for its innovation and the quality of its investors. Nevertheless, Oscar is a curious start up, because it focuses exclusively on a market – Obamacare exchanges – in which insurers are taking on a lot of pain
Read the entire column at Forbes.