Post by unlawflcombatnt on Aug 23, 2009 3:29:04 GMT -6
from truslant.com
Private health insurance monopolies punish consumers
Saturday, Aug. 22 2009
by Rick Ungar
"Those who are outspoken in their opposition to a government offered health insurance option tend to base their argument on their belief that the government’s entry into the insurance market would destroy the private insurance system because the privates could never hope to compete with a government system that does not operate for profit. Once the private system is destroyed, we would be left with only a government controlled system, a dramatic step along the road to socialism.
With this argument in mind, I thought it might be a good idea to have a look at just how competitive the private insurance companies are without the intrusion of a public government option.
We all know that a fundamental principal of capitalism is that a healthy, competitive marketplace benefits the consumer. This is precisely why we have anti-trust laws (as American as apple pie) designed to protect the consumer from the overbearing power of companies gaining too much control of the marketplace in order to deny us the benefits of competition.
And yet, with premiums rising annually at unprecedented rates, it certainly doesn’t feel like we are benefiting from all this competition when it comes to our health insurance. So, what’s the deal with that?
Are our premium costs skyrocketing as a result of the dramatically escalating cost of medical care- including the expensive high tech equipment available to us today- or is there something else at play?
In truth, there is scant competition in the private health insurance business and we are paying the price for the near monopolies these companies have succeeded in obtaining through aggressive acquisition programs.
To understand just how intensely the health insurance industry has become concentrated among a very few companies, it is necessary to understand the Herfindahl-Hirschman Index (HHI).
Don’t stop reading…it’s not as difficult as it sounds.
The HHI is a measure of market concentration used by the Department of Justice and the Federal Trade Commission to analyze markets and evaluate whether mergers and acquisitions should be blocked in order to keep companies from gaining too much monopolistic power.
In the latest measurement of health insurance companies, 34 states had HHIs of greater than 1800, the level where the government gets a little freaked out about too much power being concentrated in too few hands. And yet, in the past 12 years, only 2 health care company acquisitions have been shot down by the Dept. of Justice.
In a 2003 study cited in a 2008 report published by the Urban Institute, we learn that in all but 14 states, 3 or fewer insurance companies account for 65% of the commercial market.
The Urban Institute Report goes on to note that 2003 study also found that,
… while medical care costs grew considerably faster than inflation during these years, private insurer revenue increased even faster (emphasis added.) Thus, the market power of insurers meant that they were not only able to pass on health care costs to purchasers but to increase profitability at the same time. “....
And there you have it. Through control of the marketplace by a small number of large companies, the consumer is forced to overpay for their insurance coverage. And so, to the opponents of reform I must ask, “Is this really okay with you?”
The reality of this non-competitive environment is further born out in a 2007 study conducted by the American Medical Association.
Over the 5 years since the AMA’s first study, the country’s largest health insurers have continued to pursue aggressive acquisition strategies. The largest insurer, WellPoint Inc. (formed from the merger of Anthem Inc. and WellPoint Health Networks), has acquired 11 health insurers since 2000. The 2nd-largest health insurer, UnitedHealth Group (United) has also acquired 11 health insurers since 2000. To put this in perspective, in 2000, the 2 largest health insurers, Aetna and United, had a total membership of 32 million lives. As a result of mergers and acquisitions since 2000, the top 2 insurers today, WellPoint and United, each have memberships, respectively, of 34 million and 33 million, totaling more than 67 million covered lives. Together, WellPoint and United control 36% of the national market for commercial health insurance. In 2004 and 2005, 28 mergers valued at a total of $53.8 billion were completed or announced, which exceeded the value of all the deals completed in the previous 8 years....
So, 2 companies insure 67 million of the approximately 180 million Americans with private health insurance. And the large insurers have no intention of slowing down. In February of 2009, the AMA asked the Department of Justice to block the acquisition by United Health of Sierra Health Services, the largest health plan in Nevada. Should the merger go through, United will go from controlling 11% of the marketplace in Nevada to 56%.
How is this power used by the big insurance companies? Lower reimbursement rates to doctors and hospitals who cannot stand up to the big insurers. Far fewer choices for consumers who are forced to pay larger premiums in order to have access to the doctors and hospitals they want. Even worse, consumers must submit to the approval practices of the insurance companies who dictate what your doctor may or may not do. Can the doc say no? Not unless he or she wants to wipe out a huge number of available patients covered by the one or two insurance companies in control of the game.
This is why I’m always so amazed when opponents of reform carp about the government getting between me and my doctor. Seriously…could the government be any worse than the insurance company who gets between me and my doctor solely to improve its quarterly earnings?
Bottom line – there is very little in way of competition among health care insurers and we, the consumer, are clearly paying the price in many ways. While you may fear government’s trespass into the medical system, even the most devout opponent of health care reform should appreciate that we are all being severely taken for a ride by our health insurance providers."
Private health insurance monopolies punish consumers
Saturday, Aug. 22 2009
by Rick Ungar
"Those who are outspoken in their opposition to a government offered health insurance option tend to base their argument on their belief that the government’s entry into the insurance market would destroy the private insurance system because the privates could never hope to compete with a government system that does not operate for profit. Once the private system is destroyed, we would be left with only a government controlled system, a dramatic step along the road to socialism.
With this argument in mind, I thought it might be a good idea to have a look at just how competitive the private insurance companies are without the intrusion of a public government option.
We all know that a fundamental principal of capitalism is that a healthy, competitive marketplace benefits the consumer. This is precisely why we have anti-trust laws (as American as apple pie) designed to protect the consumer from the overbearing power of companies gaining too much control of the marketplace in order to deny us the benefits of competition.
And yet, with premiums rising annually at unprecedented rates, it certainly doesn’t feel like we are benefiting from all this competition when it comes to our health insurance. So, what’s the deal with that?
Are our premium costs skyrocketing as a result of the dramatically escalating cost of medical care- including the expensive high tech equipment available to us today- or is there something else at play?
In truth, there is scant competition in the private health insurance business and we are paying the price for the near monopolies these companies have succeeded in obtaining through aggressive acquisition programs.
To understand just how intensely the health insurance industry has become concentrated among a very few companies, it is necessary to understand the Herfindahl-Hirschman Index (HHI).
Don’t stop reading…it’s not as difficult as it sounds.
The HHI is a measure of market concentration used by the Department of Justice and the Federal Trade Commission to analyze markets and evaluate whether mergers and acquisitions should be blocked in order to keep companies from gaining too much monopolistic power.
In the latest measurement of health insurance companies, 34 states had HHIs of greater than 1800, the level where the government gets a little freaked out about too much power being concentrated in too few hands. And yet, in the past 12 years, only 2 health care company acquisitions have been shot down by the Dept. of Justice.
In a 2003 study cited in a 2008 report published by the Urban Institute, we learn that in all but 14 states, 3 or fewer insurance companies account for 65% of the commercial market.
The Urban Institute Report goes on to note that 2003 study also found that,
… while medical care costs grew considerably faster than inflation during these years, private insurer revenue increased even faster (emphasis added.) Thus, the market power of insurers meant that they were not only able to pass on health care costs to purchasers but to increase profitability at the same time. “....
And there you have it. Through control of the marketplace by a small number of large companies, the consumer is forced to overpay for their insurance coverage. And so, to the opponents of reform I must ask, “Is this really okay with you?”
The reality of this non-competitive environment is further born out in a 2007 study conducted by the American Medical Association.
Over the 5 years since the AMA’s first study, the country’s largest health insurers have continued to pursue aggressive acquisition strategies. The largest insurer, WellPoint Inc. (formed from the merger of Anthem Inc. and WellPoint Health Networks), has acquired 11 health insurers since 2000. The 2nd-largest health insurer, UnitedHealth Group (United) has also acquired 11 health insurers since 2000. To put this in perspective, in 2000, the 2 largest health insurers, Aetna and United, had a total membership of 32 million lives. As a result of mergers and acquisitions since 2000, the top 2 insurers today, WellPoint and United, each have memberships, respectively, of 34 million and 33 million, totaling more than 67 million covered lives. Together, WellPoint and United control 36% of the national market for commercial health insurance. In 2004 and 2005, 28 mergers valued at a total of $53.8 billion were completed or announced, which exceeded the value of all the deals completed in the previous 8 years....
So, 2 companies insure 67 million of the approximately 180 million Americans with private health insurance. And the large insurers have no intention of slowing down. In February of 2009, the AMA asked the Department of Justice to block the acquisition by United Health of Sierra Health Services, the largest health plan in Nevada. Should the merger go through, United will go from controlling 11% of the marketplace in Nevada to 56%.
How is this power used by the big insurance companies? Lower reimbursement rates to doctors and hospitals who cannot stand up to the big insurers. Far fewer choices for consumers who are forced to pay larger premiums in order to have access to the doctors and hospitals they want. Even worse, consumers must submit to the approval practices of the insurance companies who dictate what your doctor may or may not do. Can the doc say no? Not unless he or she wants to wipe out a huge number of available patients covered by the one or two insurance companies in control of the game.
This is why I’m always so amazed when opponents of reform carp about the government getting between me and my doctor. Seriously…could the government be any worse than the insurance company who gets between me and my doctor solely to improve its quarterly earnings?
Bottom line – there is very little in way of competition among health care insurers and we, the consumer, are clearly paying the price in many ways. While you may fear government’s trespass into the medical system, even the most devout opponent of health care reform should appreciate that we are all being severely taken for a ride by our health insurance providers."