The Forthcoming--Behavioral--Economics of Abundance: Project Syndicate

ObamaCare Increases the Salience of Antitrust in Health Insurance Markets from "Important" to "Essential"

As the extremely-sharp Aaron Edlin has taught me, apropos of the current wave of proposed health insurance mergers--Aetna-Humana, Anthem-Cigna, and Centene-HealthNet:

Obamacare signing Google Search

The coming of ObamaCare makes any willingness on the part of antitrust authority to allow these mergers to go through extremely dangerous and destructive policy indeed.

The imposition of the individual mandate to purchase health insurance makes maintaining competition in health insurance markets significantly more important. Usually, the exercise of market power and the ability to easily collude implicitly or explicitly made possible by large market shares are curved by the possibility of exit. The "exit the market and buy something else" option for consumers is the one competitor that the firm cannot acquire and merge with. It is the one competitor with which the firm cannot collude, implicitly or explicitly.

Imposing an individual mandate to purchase is a wise policy in a market place where the major market failure is adverse selection. It threatens to be a catastrophic policy in the marketplace where the major market failure is the exercise of sellers market power.