N.Y. City Sues to Block Major Health Insurance Merger

November 15, 2006

New York City officials are trying to stop a major health-insurance merger, saying it would create a near-monopoly.

New York City filed court papers Monday to prevent the region’s biggest nonprofit insurers — GHI and the HIP Health Plan of New York — from joining together, The New York Times reported.

The merger is set to take effect Wednesday. The federal Justice Department and state insurance regulators have approved it.

The joint company would be New York State’s biggest insurer, with more than four million customers. City lawyers said the company also could control more than 90 percent of the health-insurance market for municipal workers, potentially giving it leverage to raise the city’s yearly payments by tens of millions of dollars.

“If HIP and GHI merge, there will be no competition between them,” city lawyer Michael A. Cardozo said in a prepared statement. “The merged entity could raise prices substantially because the next competitor is still far more expensive.”

A GHI official called those fears unfounded. Senior Vice President Eileen Margolin said the company couldn’t raise city workers’ costs without raising prices for other customers, a move that would drive away business.

GHI and HIP announced the planned union in September 2005.

While some federal and state officials have signed off on the plan, New York Attorney General Eliot Spitzer’s office is still reviewing it. The proposal does not require Spitzer’s approval, but he could intervene to try to stop it.

The GHI-HIP merger comes after several years of consolidation in the health insurance industry. Consumer advocates have warned that the trend could reduce competition and raise prices. GHI and HIP are both considered relatively low-cost insurers.

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Information from: The New York Times, http://www.nytimes.com

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