When health insurance companies or their Congressional sock puppets
tell you that competition in the private market will reform health care
and cut costs, run for the hills. It’s a flat-out lie, and their
lobbyists’ noses are getting longer every day. These companies use lack
of competition to jack up your insurance rates beyond the rate of
inflation and increase their own profits.

For instance, even in 2003 most states were dominated by three or fewer health insurance companies.
In 34 states, the dearth of competition was bad enough to trigger
antitrust concern, by a standard Federal Trade Commission measurement.
By 2008, in almost all of the major U.S. population centers, one insurer controlled 30% or more of the health insurance market and in 15 states, one insurer controlled 50% or more of the market.

The 2003 study, published by UC Berkeley health economist James Robinson, was nicely summed up
in testimony to Congress this spring by Linda Blumberg of the Urban
Institute. She also noted the effect: higher prices for you and me,
more profit for health insurers:

The Robinson analysis also found that while medical
care costs grew significantly faster than inflation during the 2000 to
2003 period, private insurer revenue grew even faster. In other words, the
insurers’ market power allowed them to pass on health care costs to
purchasers and increase their own profitability at the same time.

The 2007-2008 study, by the American Medical Association, shows even
less competition today, and is also jammed with statistical proof. To
get the flavor of it, click here for the whole study, then look at the Overview on page 5.

Of course, the underlying question is why we even want to keep dealing
with private insurance companies, since far more Medicare recipients
are happy with their health care than people with private insurance.
Los Angeles Times columnist Michael Hiltzik, in a zinger column on Monday, posed the right question:

Throughout the heroic struggle in Congress to provide a "public option"
in health insurance, one question never seems to get answered: Why are
we so intent on protecting the private option? …

We can expect to be overwhelmed with an industry ad campaign worth
millions of dollars (remember Harry and Louise?) exhorting us to write
our lawmakers to preserve the American way of healthcare.

So it’s proper to remind ourselves what that American way entails. For
if the insurers have proved anything over the last 15 years as the
health crisis has gathered speed like an avalanche roaring downhill,
it’s that they’re part of the problem, not the solution.

The firms take billions of dollars out of the U.S. healthcare
wallet as profits, while imposing enormous administrative costs on
doctors, hospitals, employers and patients. They’ve introduced
complexity into the system at every level. Your doctor has to fight
them to get approval for the treatment he or she thinks is best for
you. Your hospital has to fight them for approval for every day you’re
laid up. Then they have to fight them to get their bills paid, and you
do too.

Hiltzik sums up the orgy of mergers that has killed whatever competition the health insurance market once had.

The two largest insurers, WellPoint and UnitedHealth Group, each
acquired 11 other insurers between 2000 and 2007. They now control a
total of 67 million "covered lives" (that’s customers in health
insurance-speak).

It’s also corporate healthcare interests funding and directing the "advocacy" groups ginning up disruption and intimidation at
public health care meetings around the country. So Hiltzik’s column
answers its own question: The defenders of the "private option" are a
gargantuan political lobby–not "we" as in most Americans–using any
tactic to protect their own monopolistic business model (and not as an
"option").