[Ip-health] Health Insurers Fight a Public Plan, but Rarely Each Other: Studies show health insurance is one of the least competitive markets in the U.S.....

[Joana Ramos]

 From Business Week:

http://www.businessweek.com/technology/content/jul2009/tc20090721_255306_pa=
ge_2.htm

HEALTH INSURANCE July 21, 2009, 8:20PM EST
Health Insurers Fight a Public Plan, but Rarely Each Other
Studies show health insurance is one of the least competitive markets in
the U.S., which may be why premiums are rising

By Catherine Arnst

Health insurers are on board with many congressional proposals for
health-care reform. But they are vociferously opposed to the creation of
a publicly financed insurer, arguing that they couldn't possibly compete
against a low-cost public plan that has no need to earn profits. They
may have a point. Many economists say insurers face very little
competition now across large swaths of the U.S.

Various studies have found that health insurance is one of the most
concentrated markets in the U.S., and that the lack of competition may
be one factor behind sharply rising premiums. Each year, the American
Medical Assn. surveys the competitive landscape for commercial health
insurers; the latest report found that out of 314 metropolitan areas
across the nation, 94% can be defined as highly concentrated, with two
companies or even a single provider dominating the market. In 15 states,
one insurer has half or more of the entire market, and in seven states,
a single insurer has 75% or more.

This concentration has become a potent argument for supporters of a
public plan, President Obama among them. Such a plan would theoretically
lower administration costs. And with no need to generate profits for
shareholders, it could offer lower premiums=97thus applying precisely the
kinds of pressures that are most needed. On July 21, in White House
remarks urging action on his health-care initiative=97something he now
does on almost a daily basis=97Obama again spoke of the need for a public
plan. "Americans will be able to compare the price and quality of
different plans, and pick the plan that they want. If you like your
current plan, you will be able to keep it," he said. "And each bill
provides for a public option that will keep insurance companies honest,
ensuring the competition necessary to make coverage affordable."

INDUSTRY AD CAMPAIGN LAUNCHED JULY 20
Insurers argue that such a plan would be a disaster for their industry.
They point to an analysis by the Lewin Group, a subsidiary of
UnitedHealthcare (UNH), that predicts that 103 million Americans would
jump to the cheaper public option, out of the 160 million now insured
commercially (the Congressional Budget Office estimates that only 9
million to 10 million would choose a public plan by 2019). Karen
Ignagni, president of the industry lobbying group America's Health
Insurance Plans, or AHIP, said in a letter to Congress that a public
plan would "significantly increase costs for those who remain in private
coverage."

Insurers believe they are already offering up plenty of other changes to
their business practices to help further reform, and should be spared
the burden of the public plan. AHIP has come out in favor of ending
different premiums based on health status and eliminating coverage
denials because of pre-existing conditions. It also supports the
creation of a publicly run insurance exchange that would make it easy
for consumers to compare policies from different companies, bringing
price transparency to an industry that can be frustratingly opaque. "We
think comprehensive reform is needed," says Alissa Fox, senior
vice-president of Blue Cross Blue Shield.

AHIP even launched an ad campaign on July 20, but it is far different
from the devastating "Harry and Louise" ads of the early 1990s that
helped sink President Clinton's efforts at reform. This time around, the
industry's ads are supportive of reform proposals, and they don't
mention the public plan option. That could be because, as Charles
Boorady, health-care analyst with Citi Investment Research (C), says:
"The health insurers=85have a difficult PR battle."

NOT-SO-HEALTHY COMPETITION
Certainly there are plenty of statistics and studies that come out
against the industry on the issue of competitiveness. Insurance
companies complain about the AMA's methodology in its
market-concentration studies, but the nonpartisan U.S. Government
Accountability Office reached many of the same conclusions in a recent
report. It found that, for small group coverage, the largest insurer in
a state has on average 43% of the market, up from 33% in 2002. In nine
states the largest carrier has more than 50% of the market. "There is
obviously a need for more competition in this market," says Karen Davis,
president of the nonprofit Commonwealth Fund, which does research on
health-care issues.

The industry itself doesn't see it that way. Insurers argue that, with
some 1,300 companies in the business, it can be cutthroat. "It doesn't
feel like the market is not competitive to us," says Bradley Fluegel,
chief strategy officer for WellPoint (WLP), the nation's largest insurer.

The benefits of healthy competition, however, are hard to spot. Between
2000 and 2007, annual increases in premiums averaged around 9%, while
health-care spending increased only 6.7%. Over the past 10 years health
insurance premiums have increased 120%, compared to cumulative inflation
of 44% and cumulative wage growth of 29% over the same period, according
to a Henry J. Kaiser Family Foundation survey.

FACING DOMINANT HOSPITALS
Part of the problem, says Commonwealth's Davis, is that the insurers
cannot use their market power to bring medical costs down, because they
are facing off against hospitals with just as much power. A 2006 study
found that 88% of the nation's large metropolitan markets were dominated
by one or two major hospitals. "You've got a dominant insurer up against
a dominant provider of health care in a lot of markets," says Davis.
"That just doesn't work out well for lowering costs."

Arnst is a senior writer for BusinessWeek based in New York. With
reporting by Joseph Weber in Chicago.



-------------------------
Joana Ramos, MSW
Cancer Resources & Advocacy
Seattle WA USA
+1-206-229-2420
http://ramoslink.info/
www.bmtbasics.org