22 December 2005


Colorado is seeing coming and goings of many of its major economic players.

United Healthcare and Pacificare, two of the state's largest health insurance providers, are merging and the "combined company will control 27 percent of the state's health-insurance market." Proponents claim that the merge will allow for administrative streamlining, but the lack of competition will hurt. Anthem (the local Blue Cross/Blue Shield affliate), Aetna, CIGNA, Great-West Healthcare, Denver Health Medical Plan, HMO Colorado/HMO Health Plans, Rocky Mountain Health and Kaiser are the other licened HMO competitors in the state. Not all of those competitors, moreover, offer generally available health insurance plans in the Denver metro area, the state Division of Insurance guide notes only four companies offering HMO coverage post-merger in the Denver metro area. The lowest 2005 price for bare bones insurance in the state for a family like mine working at a small business, according to the guide is $589 a month, but given the huge rate hikes we are seeing in 2006 (my COBRA payment for health insurance from a publicly traded company with thousands of covered employees is going from about $700 a month to about $1000 a month in 2006 for essentially the same coverage and I have yet to get a firm quote that is a better deal as I work to find my own firm a new health insurance plan), so I'm not optimistic than anything close will be possible in 2006.

Southwest Airlines is joining the Denver International Airport market in January, which will add welcome competition to United and Frontier and in all likelihood, keep Denver airfares low on routes where there is competition, a welcome change from the days when United was the monopoly provider on almost all routes at the airport. Air Canada will also be providing more competition at DIA.

Grocery chain Albertsons is in the process of auctioning itself off. Loss of competition in the grocery market is less of a concern. Albertsons is already behind Kroger (i.e. King Soopers and City Market), Safeway and Wal-Mart in market share in Colorado. And, Target, K-Mart, CostCo, Whole Foods, Wild Oats, Vitamin Cottage and Sunflower are also poised to fill some of the gap an Albertsons departure would leave behind. Cub Foods has already left the market (but has also left at least some of its stores vacant). The loss of Albertsons pharamacies is probably a bigger concern, as there seems to be less competition in that market. But, it is possible that a new drug store chain in Colorado might emerge from an Albertsons demise.

The movie theater industry, which already experienced a massive consolidation when Regal Cinemas were created from numerous bankrupt or near bankrupt movie chains, is consolidating again. "AMC and Loews, the second- and third-largest movie chains, announced in June that they planned to merge their businesses. The transaction will probably be completed in the first quarter." It is hard to tell if this will be good, because it gives Regal stronger competition, or bad, because it will shrink the oligopoly further. I'm inclined to think it is bad news. Incidentally, the consolidation of the mainstream movie theater industry (let alone the movie rental industry which is now dominated by Blockbuster), is not matched in the art and foreign film theaters, where Denver now has several competing chains, as opposed to relying exclusively on the Landmark Theater chain.

The reality of modern living is that big business manuevers affect your daily life whether it involves your health care, taking a trip on a plane, buying drugs and groceries, or watching a movie. The perfect competition model you learned in introductory microeconomics in high school or college isn't the real world. In the real world, the Iron Law of Oligopoly, is the dominant model of the economy.

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