Tuesday, September 27, 2005

WellPoint, WellChoice, less choice WellPoint, the US's largest health insurer, just got significantly bigger. The company announced it will buy the largest health insurer in New York state, WellChoice, for $6,5 billion. WellChoice until recently was called Empire Blue Cross Blue Shield. The company, once a nonprofit, became a publicly held company in 2002. WellChoice itself is the outcome of a major merger in 2004 between the two largest former Blue Cross affiliates, when Anthem bought out WellChoice networks (for $16.5 billion) and adopted the WellChoice name for the enlarged company. The new company will have over 33 million members in 14 states, a remarkable number in the once-fragmented US health insurance industry. Indeed, he buyout accelerates the race to get bigger in the health insurance industry. UnitedHealth, the #2 health insurer, recently announced the purchase of PacifiCare, a $8.4 billion deal, building a customer base of 25 million. Ironically, last year UnitedHealth bought out Oxford Health Systems (for $5 billion), after that company failed to reach a merger agreement with WellChoice. In other words, these two companies will have between them around one third of the 150 million or so of insured Americans (not including the around 50 million primarily on Medicare or Medicaid). Around 40 million Americans have no health insurance at all. Another two companies account for another 24 million customers: Aetna has 14 million health plan customers, Cigna has 10 million (both companies sell other insurance products). Health care is a profitable industry that keeps growing, with little curb from the law of supply and demand. Bigger health insurance companies mean less competition on rates plus more power over hospitals, doctors, nurses, and suppliers. It also means the power to contend on an equal footing with pharmaceutical companies. We are heading to a health system controlled by three or four giant companies. 5:19:26 PM

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