More time for Aetna decision

By DANIEL RIORDAN

The Commerce Commission has extended by 10 working days its deadline for ruling on Southern Cross Healthcare's application for clearance to buy Aetna Health (NZ).

Meanwhile, the Health Funds Association, the industry umbrella group, says it has no major concerns with the takeover bid.

Association chairman Tony Douglas, emphasising that his was a preliminary view pending more information on the offer, said the issue of market dominance that the commission would have to address was far from clear-cut.

Southern Cross is the country's biggest health insurer with an estimated 63 per cent of the $500 million market (by revenue). Aetna is number two, with about 18 per cent, although Southern Cross disputes these figures.

The market leader also says low barriers to entry and low switching costs for consumers keep it honest.

Mr Douglas agrees. "Does market dominance by sheer weight of numbers make Southern Cross dominant? It doesn't necessarily follow. In many cases the dominant player can be more at risk than its smaller counterparts."

The commission will now report back by August 15 rather than by August 1. Mr Douglas said the entrance into the market of smaller players with new products, such as Sovereign, State and his own company Axa, had helped to keep the lid on premium increases and he did not believe consumers would be disadvantaged if the deal went ahead.

His comments are at odds with the views of the Consumers' Institute, which last week said it would be surprised if the deal were approved, given the pressure that would place on premiums.