Acceptance of the proposal by the Physicians Group Clinic (PGC) will give Anthem Insurance Group greater control because of an increase in their bargaining power. The industry of health insurance is highly concentrated. Moreover, it is characterized by high and ever-increasing insurance premiums available for consumers in the market. According to Erin Trish & Herring, (2017), an increase in the level of interest-based on the concentration of the power of the insurer is customarily warranted for various reasons. Comprehension of these high levels of concentrations in the market as well as their premium implications for the consumers is particularly valuable for an industry that faces such rapidly rising and overly high premiums. However, Anthem will have too much power in the negotiation of premium, and this may make the PGC suspicious due to their level of powerlessness.
According to Mimra, Nemit, & Waibel, (2019), at times, firms may attempt to vary the terms of the insurance agreement. Although this is legal and possible for various reasons, both parties must reach an agreement based on the new terms and must determine whether they are favourable or unfair to them. The terms of such conditions cannot be termed fair or just in any way, and this is because they were not highlighted at the start of the contract. By the mere issuance of a policy, the firm promises to cover the holders of the system against a set of contingencies. In most instances, in case the circumstances of the holders of the policy change in the course of holding the insurance policy, then that forms part of the risk against which the company agrees to protect.
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Increased supplier power frequently leads to a reaction from the buyers. Proper customer services are the primary pillar of strength in the business of insurance. Excellent relations between the PGC and Anthems Insurance Company are essential for their business model because it allows them to serve their customers and most importantly, to provide the services they offer. According to Miraldo, Proppera, & Williams, (2018), commercial insurance entails creating a functioning relationship between the customer and the company providing services. The PGC is liable to its customers and depends on the excellent standing they create with their customers to make the difference. Companies must strive to have comprehensive safety programs and offer an outline to their consumers about the program in case of any eventuality.
Miraldo, Proppera, & Williams (2018) further posit that the current insurance market is rather segmented and highly unpredictable. Increasing the number of PGC patients covered by the insurance cover can mean both positive and negative future trajectories for the business. On the one hand, the contract transfers the risk of loss from the individual customers to the PGC business to the company whereas, on the other hand, it may make the customers sceptical about carrying out business with the pharmacy. The customers stand the threat of avoidance by Anthem, retention of the acknowledgment of the risk incurred and transferring of risk to the PGC Company due to the inability to carry the burden.
Although the PGC Company can consider the proposition by the Anthem Company to consolidate more market power, they must do so with a clear mind and must settle down to new terms of agreements. The Anthem Insurance Company has been doing business in the state for the last 50 years, and hence, its position in the market is somewhat cemented. Even though the new company outfit offers new incentives to the PGC firm, these incentives are likely to affect or alter the way they have been doing their business. The fact that the new incentives are likely to affect or change their modes of doing business should be cause for alarm. PGC must examine and determine whether they stand a chance to benefit from these incentives and if so, how exactly they are likely to profit
The mere fact that the entire Anthem outfit forms a vast network and controls 20 per cent of insurance for non-governmental institutions does not mean that all the customers for the PGC firm will aptly be covered by the insurance offerings. Insurers prefer when the insured does not incur expensive premiums. Therefore, they have official or unofficial policies that focus on rejecting claims they consider highly expensive and those that work to their disadvantage. The burden of proof falls on the PGC firm, and they may never want to be in positions against the insurer. The firm must approach the manner of understanding that it is never too late to renegotiate the terms of engagement, and this is especially more so because they act as an in-between the insurance company and their customers.
Porter’s Five forces cite the bargaining power of suppliers as one of the vital forces that determine the cost of products and services in the market place (Erin Trish & Herring, 2017). The only way the PGC firm can inhibit the power of the Anthem Insurance Company is by exploring other available options of insurance available to them. Since the company only controls 20 per cent of the non-governmental insurance market, PGC must seek to explore the remaining 80 per cent and use it as their mechanism of controlling the power of the incentives from Anthem.
PGC firm must understand that the Insurance company is not obliged to treat its customers promptly and fairly and hence they must make efforts to find the best deals of insurance for its customers. Additionally, understanding that the insurance company will try to avoid paying for the medical expenses can help them understand the kind of incentives best for them and those that may trap them and have them pay for the damages incurred. The firm has the right to appeal the offer from the insurance company in case they feel it is not in their favour and therefore, they may choose to combine various insurance cover providers to break the monopoly and power that Anthem may have over them.
References
Erin Trish & Herring, B. (2017). How Do Health Insurer Market Concentration and Bargaining Power with Hospitals Affect Health Insurance Premiums? HHS Public Access, 42 (2), 104–114. DOI: 10.1016/j.jhealeco.2015.03.009
Mimra, W., Nemit, J., & Waibelc, C. (2019). Voluntary pooling of genetic risk: A health insurance experiment. Journal of Economic Behavior & Organization, 1 (2), 121-132.doi. 10.1016/j.jebo.2019.04.001.
Miraldoa, M., Propperab, C., & Williamsd, R. (2018). The impact of publicly subsidized health insurance on access, behavioural risk factors and disease management. Social Science & Medicine, 217 (1), 135-151.
