In this paper we report a method to overcome the limitations of gain-saturation and two-photon absorption faced by developers of high power single mode InP-based lasers and semiconductor optical amplifiers (SOA) including those based on wide-waveguide or slab-coupled optical waveguide laser (SCOWL) technology. The method is based on Y-coupling design of the laser cavity. The reduction in gain-saturation and two-photon absorption in the merged beam laser structures (MBL) are obtained by reducing the intensity of electromagnetic field in the laser cavity. Standard ridge-waveguide lasers and MBLs were fabricated, tested and compared. Despite a slightly higher threshold current, the reduced gain-saturation in MBLs results in higher output power. The MBLs also produced a single spatial mode, as well as a strongly dominating single spectral mode which is the inherent feature of MBL-type cavity.