Consumer Watchdog – Health insurance competition: One of their bigger lies

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").