The Largest Health Insurance Firms in the US - Essay Example

The largest health insurance firms in the US have been pursuing mergers. For instance, United Health Insurance is interested in merging with both Cigna and Aetna Insurance firms. Humana Health Insurance firm is also up for a possible major while Anthem Insurance is pursuing Cigna. Cigna also intends to buy Humana. Therefore, the series of potential mergers are prevalent in the insurance industry. ObamaCare is in support of the consolidation and establishment of a bigger insurance fraternity. Therefore, it is advocating for the formation of oligopolies that cover the diverse insurance firms in USA.

However, if ObamaCare succeeds in creating oligopolies, the insurance sector may experience some problems for example high operating costs and premiums, low-quality service and less innovation that would otherwise improve service provision. The merging of the firms would significantly reduce competition. In a non-oligopolistic market, insurance firms strive to gain competitive advantage over other fellow service providers. Providing quality service at affordable prices is an essential competitive advantage.

Therefore, competition is necessary as it guarantees the proper performance of insurance as opposed to an oligopolistic market scenario. Conversely, the creation of oligopolies would also benefit clients and shareholders. If insurance firms come together to form a single commercial entity, the standardization of benefits that accrue to clients would be possible and premiums may be adequately controlled. As a result, mergers would attract more customers compared to independent insurance firms.

The interest of shareholders is to reduce overhead costs in administration and other expenses. Consolidation of the insurance industry would initiate a centralized administrative system that would control the firms under the oligopoly and reduce the subsequent administrative costs. In addition, ObamaCare advocates for extensive consolidation of hospitals and health care services. Large health care facilities are in a better position to provide quality services and maintain best practices by use of the vast resources that are available.

However, today, hospitals concentrate on the maximization of their revenues other than improving efficiency in their service provision processes. The consolidation of healthcare systems started in 1990 and ObamaCare has been sustaining the trend (WSJ 1). Ironically, insurance consolidation intends to offset the merging of healthcare service providers yet ObamaCare is supporting amalgamations in both sectors. The number of hospital mergers has been increasing in the US on an annual basis. The number of amalgamation deals that have remained closed in 2014 exceeds the agreements made in 2009 by 50 percent (WSJ 1).

In the current healthcare scenario, three out of five healthcare facilities belong to a system that constitutes other hospitals. Insurers are opposed to such mergers because larger healthcare institutions would demand for high mark-ups during the discussions for private reimbursement rates. Enhancement of competition in the healthcare market is dependent on technological advancement and the adoption of new biomedical trends. Therefore, the aspects of healthcare finance should be conforming to the prevailing trends in the medical sector.

However, the government disrupts through ObamaCare. Formation of cartels in the health sector would affect negatively on patients. Cartels focus on economic gains and may ignore the needs of patients in terms of quality, cost and safety in service provision. Work Cited The Wall Street Journal (WSJ). ObamaCare’s Oligopoly Wave. June 19, 2015. Web. June 20, 2015. Accessed from http://www.wsj.com/articles/obamacares-oligopoly-wave-1434755295