The proposed merger of Highmark and Independence Blue Cross will likely be getting serious scrutiny by state regulators. And that's a good thing.

The merging of Pennsylvania's two dominant health insurance companies appears less likely to benefit consumers in a business environment already characterized as lacking competition.

Earlier this week, the state House approved a bill that would expand the state insurance commissioner's influence over the proposed merger of Highmark and Independence. The state Senate already has passed a similar bill.

The House bill differs, however, from the Senate bill by including a provision to create an eight-member panel. The House bill further says that the insurance commissioner could not approve the Blues' merger unless six of eight members of the panel agreed.

Taking the state's OK on such a massive merger out of a single individual's hands is probably a good idea. But Gov. Ed Rendell opposes the panel idea, arguing that it introduces legislative influence (the General Assembly would appoint four members) into an agency that historically has been under the executive branch because the governor appoints the insurance commissioner.

So, if Rendell and the insurance commissioner he appointed find this merger useful, it could be approved. Adding a panel, with members not tied directly to the governor, is a useful way to ensure that there is broader consensus that a merger of the Big Blues is good for Pennsylvanians.

But whether an advisory panel is created is not the important issue. The proposed merger of two hugely profitable non-profits should be examined for its likely impact on consumers and health care costs in the state.

One hospital chief executive officer currently involved in a dispute with Highmark, Inc., over his hospital's reimbursement for medical procedures has an interesting perspective on the proposed merger. Jerry Fedele, CEO and president of West Penn Allegheny Health System, expressed frustration in dealing with the already dominant insurance provider, especially when it comes to his hospital receiving lesser reimbursement payments than larger Pittsburgh hospitals get for the same medical procedures.

On the proposed merger, Fedele was quoted in the Pittsburgh Business Times as saying, "I only wish they had to do this (merge) because of competition coming into the market. I don't see any competition."

The lack of competition among providers of health insurance is also an issue for Dr. C.Richard Scott, vice chair of the Pennsylvania Medical Society. Scott has said that the physicians' trade group is worried that a merger of such dominant players as Highmark and Independence will make it even tougher for real competition to enter the state.

Herb Denenberg, the state's insurance commissioner in the early 1970s, suggests the giant health insurers are "already fat and arrogant enough." Commenting in a Pittsburgh newspaper, Denenberg, who has written college textbooks on insurance law, brought up another concern the proposed merger poses — the possibility that the combined company, which would be the third-largest health insurer in the nation, would switch to a for-profit company. And with a combined cash surplus of close to $6 billion, a conversion to for-profit status would take all that money earned from policyholders and put it in the hands of shareholders.

On several different levels, the proposed merger of Highmark and Independence raises red flags. The public deserves to hear a full and open discussion on the lack of serious health insurance competition in the state, justification for massive cash reserves held by the so-called nonprofit companies, and on the possibility that a merger could lay the groundwork for a conversion to for-profit status.

The more people learn, the more it appears the companies will have an uphill battle proving this merger will improve any of these conditions.