06.30.09
Public Option will finally bring competition to health insurance
When GOP wordsmith Frank Luntz released his talking points on health care he specifically told the GOP to keep away from arguments about the “free market, tax incentives and competition” – (#4) on the memo. Now we know why, Health-Care Market Characterized By Consolidation, Not Competition. There is no competition, or a free market, in health care insurance as it stands now.
But the notion that most American consumers enjoy anything like a competitive marketplace for health care is flatly false. And a study issued last month by a pro-reform group makes that strikingly clear.
The report, released by Health Care for America Now (HCAN), uses data compiled by the American Medical Association to show that 94 percent of the country’s insurance markets are defined as “highly concentrated,” according to Justice Department guidelines. Predictably, that’s led to skyrocketing costs for patients, and monster profits for the big health insurers. Premiums have gone up over the past six years by more than 87 percent, on average, while profits at ten of the largest publicly traded health insurance companies rose 428 percent from 2000 to 2007.
Far from healthy market competition, HCAN describes the situation as “a market failure where a small number of large companies use their concentrated power to control premium levels, benefit packages, and provider payments in the markets they dominate.”
The Executive Summary [.pdf] of the report points out that the lack of competition hurts rural and lower population states more, is especially bad for small businesses, and the only thing rising faster that insurance premiums are insurance corporation profits and CEO pay. The numbers from the HCAN report on Texas are not good [.pdf]:
- According to a 2008 AMA report, Health Care Service Corp., the biggest Texas health insurer, controls 44 percent of the state market through its BlueCross BlueShield of Texas subsidiary. Together with UnitedHealth Group Inc., the second largest Texas health insurer,
they hold 68 percent of the market. - Some local markets are even more concentrated. In Abilene, Health Care Service Corp. has an 85 percent market share.
- Health insurance premiums for Texas working families have skyrocketed, increasing 87 percent from 2000 to 2007.
- For family health coverage in Texas during that time, the average annual combined premium for employers and employees rose from $6,638 to $12,403.
- For family health coverage in Texas, the average employer’s portion of annual premiums rose 88 percent, while the average worker’s share grew by 83 percent.
- From 2000 to 2007, the median earnings of Texas workers increased 15 percent, from $23,032 to $26,484. During that time health insurance premiums for Texas working families rose 5.8 times faster than median earnings.
When a firm has more than a 42 percent share of a single market, the U.S. Justice Department considers that market to be “highly concentrated.” This means that an insurer could raise premiums and/or reduce the variety of plans or quality of services offered to customers with impunity.
The full report can be found here. Competition is why the public option is a must in any health insurance reform that passes. Because without it there is no competition, and prices will not go down.
What voters need to understand about a reform plan is that:
- They will not lose health care if the lose a job or get sick.
- The power will shift from the insurance corporations to the people.
- It will reduce costs for families, businesses, and the country.
It’s key to remember that Republicans don’t oppose a plan with a public option because they don’t think it will work. They oppose it because they’re pretty sure and afraid that it will. Because if it does work it would put them in the minority for a long time once again.