Clash in California
February 25, 2024
KFF Health News published an article describing a conflict between Anthem Blue Cross and UC Health. More than half a million patients could be affected (needing to find new healthcare providers) if the two large organizations do not come to an agreement. From a commercial perspective, these types of conflicts are understandable: one side wants to be paid more and the other side wants to not pay as much as has been demanded. The two large organizations engage in brinkmanship to gain larger concessions.
An underlying problem that exacerbates the problem is the consolidation of the industry within fewer, but larger, organizations. Having many, smaller buyers and sellers would allow for much more robust price discovery. As it is, "Stremikis noted that as mergers occur in the health industry, patients are left with fewer choices. Any time there are disputes, disruptions are felt more widely."
While larger organizations might theoretically achieve some economies of scale, "A KFF analysis found widespread evidence that consolidation of health providers leads to higher health care prices for private insurance. The same brief from 2020 found some evidence suggesting that large, consolidated insurance companies are able to obtain lower prices from providers, but that has not necessarily led to lower premiums for patients." Concentration of market power into just a few organizations rarely seems positive for consumers.