This month, the Department of Justice is gearing up for warfare against acquisitions between healthcare giants Humana and Aetna, as well as Cigna and Anthem. The DOJ will be using the federal government's most powerful weapon: antitrust law.
For millions of Americans, the acquisition has the potential to do harm. These insurance giants will monopolize insurance markets in 23 states which means that citizens in those areas have to purchase plans from one provider. These patients will face higher premiums on their medical bills and many will ill-afford life saving treatments. Physicians will have to accept unfair terms with insurers and their role as patient advocates will erode.
To put simply, monopolies are not good. Where there is no competition to check the power of a firm, the marketplace of ideas are bottled up and concentrated to a select few. It hurts not just consumers, but humanity loses out on potential innovation that would otherwise make life more pleasant.
And it’s not just health insurers, these evil fat-cat monopolies come in all shapes and sizes. The most heinous one -- arguably: Texas Instruments.
Yes, the maker of those pesky blue TI-108’s has built a global graphing-calculator empire. It accounts for over 90 percent of all graphing calculator sales in the US and maintains a 50 percent profit margin on its products. And given nonexistent competition, Texas Instruments has neither lowered the prices of many of their goods nor updated its technologies. For example, a TI-84 Plus have essentially the same price and level of technological sophistication in 1999 and in 2014.
That’s not to say that the company hasn’t rolled out anything new, it’s just that the innovations have been dull. Colored displays and slightly more complex calculations are not game-changers. And one should not expect much either; schools are reluctant to adapt to new breeds of calculators out of concerns over cheating. However, the real hazard comes from the fact that the prices of TI calculators have held steady, defying a natural phenomena known as economies of scale (i.e. costs of production goes down overtime).
This lack of competition in the graphing calculator industry may have insulated us from ingenious new gadgets -- perhaps, 20-dollar calculators with retina displays that allow users to code. If health insurance companies pursue these mergers, they stand the chance of failing to innovate in an industry with excruciatingly low public approval . And unlike calculators, poor brand quality will jeopardize people’s ability to finance life-saving treatments.
The health insurance behemoths will make the case that consolidation will allow them to be available to a broader region; and that they will be able to offer greater quality, and reduce costs -- claims they have already made. But history, as well as intuition, says the opposite. Previous rounds of acquisitions in the insurance industry has lead to a spike in insurance premiums by seven percent. Even if they were able to follow through with such promises, there’s no stopping them from price discrimination or ensuring that architects of insurance services don't fall into groupthink.
In reality, these companies' oligopolic statuses are not the only reason for flaws in health care and calculators. There are systemic challenges facing governments, the private sector, and consumers themselves, such as poor public services. While changes to anything at this scale is unlikely, the least we could do is protect our right to competitive marketplaces.
