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Economist Finds Highmark/IBC Merger Would Result in 70 Percent Share in Pennsylvania, Far Higher Than Initial Reports
Date:7/8/2008

HARRISBURG, Pa., July 8 /PRNewswire/ -- An economist examining the proposed merger of Highmark, Inc. and Independence Blue Cross testified today that the combined companies would have a market share far greater than has been represented so far. According to testimony presented to the Pennsylvania Insurance Department today in Pittsburgh by a prominent economist, Dr. Monica Noether of CRA International, the proposed merger would result in a combined entity with more than 70 percent of the statewide health insurance market, even more than the substantial 53 percent share frequently cited in press reports and elsewhere.

The 53 percent share figure incorrectly includes a variety of insurance products that consumers do not view as substitutes for commercial medical insurance, such as Vision, Medicare, and Dental, and fails to include Highmark and IBC's sizable self-insured health business, which consumers do regard as substitutes, according to Dr. Noether, whose study was commissioned by Capital BlueCross. Focusing on both fully-insured and self-insured commercial health business in Pennsylvania, the merger would result in a combined entity with more than 70 percent of the statewide market. In other words, seven out of every 10 commercially insured Pennsylvanians would be covered by the merged company.

"When competitive entry is difficult, as appears to be the case in Pennsylvania, a single company with more than 70 percent of the market is likely to have the ability to exert market power, which means they possess the ability to profitably raise price or reduce quality, innovation or choice in ways that can harm consumers," Dr. Noether testified.

Additionally, Dr. Noether disagreed with the assertion by Highmark and IBC that their merger would not impact competition because they do not compete today. She noted that Highmark and IBC do not compete because they have chosen not to do so through a 10-year non-compete agreement that expired on the eve of their announced plan to combine -- and further that Highmark likely would compete with IBC, and thus enhance competition in Pennsylvania's health insurance marketplace, if the merger did not proceed.

"This proposed merger would mean a fundamental, long-term change in Pennsylvania's health care landscape, one that requires careful examination of its long-term impacts on consumers, providers and competition," said Anita M. Smith, president & CEO of Capital BlueCross. "That is why Capital BlueCross has commissioned CRA International to fully examine this important issue. As a noted economist who specializes in health care, Dr. Noether's findings will enhance this essential public dialogue and help public policymakers to determine appropriate conditions to assure a fair and level playing field in any post-merger environment."

A full copy of Dr. Noether's written testimony, along with all other publicly available documents from the consolidation proceedings, can be obtained from the Department's Web site at the following link -- http://www.ins.state.pa.us/ins/cwp/view.asp?a=1347&Q=547942&PM=1.

Capital BlueCross is an independent licensee of the Blue Cross and Blue Shield Association


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SOURCE Capital BlueCross
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