The NIB Holdings Limited (ASX: NHF) share price is trading lower today despite a potentially positive announcement.
In morning trade, the private health insurer's shares are down 1.5% to $6.64.
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What did NIB announce?
This morning the Australian Competition and Consumer Commission (ACCC) revealed that it would authorise Honeysuckle Health and NIB to form and operate a health services buying group.
However, the competition watchdog's authorisation comes with conditions.
The release explains that the ACCC has granted authorisation with a condition that major insurers Medibank Private Ltd (ASX: MPL), Bupa, HCF, and HBF in Western Australia are not allowed to join the buying group.
In addition, the ACCC has only granted authorisation for five years, rather than the 10 years sought by Honeysuckle Health and NIB. This is to facilitate a review of the effects of the authorisation at an earlier time, if reauthorisation is sought.
The buying group intends to collectively negotiate and manage contracts with healthcare providers, including medical practitioners and hospitals, on behalf of NIB and other private health insurers and other healthcare payers who join the group.
What did the ACCC say?
ACCC Commissioner Stephen Ridgeway revealed that the regulator was hopeful that the buying group would benefit consumers.
He commented: "The arrangement is likely to have a public benefit by increasing competition between health services buying groups. We expect this is likely to result in better service and pricing provided by buying groups to smaller private health insurers, who will then be in a better position to provide reduced premiums and improved services to consumers,"
"If the buying group expands to more of the smaller insurers, we consider that Honeysuckle Health's Broad Clinical Partners Program is likely to help reduce uncertainty for more consumers about out of pocket expenses for certain types of procedures. It is also likely to provide more consumers with greater access to medical procedures which attract no out of pocket expenses," Mr Ridgeway added.
Though, the Commissioner revealed that he does have some concerns.
He explained: "However we were concerned about the potential effect on competition if the buying group involving Honeysuckle Health and nib became too large and gained too much bargaining power, and have accordingly imposed a condition that excludes the participation of other major health insurers. These insurers represent around 70 per cent of the market in most states and territories."
The ACCC also revealed that it considered concerns that it could lead to a US-style managed care. However, it dismissed these concerns after an extensive investigation.
The NIB share price is up over 10% in 2021.
