The White House says…
On Wednesday, a leading insurance broker laid out in clear terms what many Americans could already guess: the insurers’ monopoly is so strong that they can continue to jack up rates as much as they like – even if it means losing customers – and their profits will continue to soar under the status quo.
…which refers to an article by Sam Stein of The Huffington Post that says…
The market concentration for health insurance is so monopolized in some areas that insurance companies are willing to raise prices and lose customers in an effort to improve their bottom line, a leading insurance broker told Wall Street analysts on Wednesday.
…which is based on a conference call hosted by Goldman Sachs with insurance broker Steve Lewis of Willis. The only problem is in reading the transcript from the call, I’m not exactly sure that’s what Lewis said. (I called Lewis for clarification, but didn’t hear back by presstime). What he did say for sure was the following:
We feel this is the most challenging environment for us and our clients in my 20 years in the business. Not only is price competition down from year ago (healthcare) inflation is also up and appears to be rising. The incumbent carriers seem more willing than ever to walk away from existing business resulting in some carrier changes.
What this says to me is that health insurers are coming out of an underwriting downcycle and putting margin improvement (i.e., profits) ahead of membership growth — similar to what happened a decade ago when the health plan market was far less concentrated. Costs are rising and therefore premiums are rising — and therefore the likelihood is more people will be priced out of the market, face higher costs or suffer reduced benefits. As Goldman notes:
Two years ago, Lewis and his team were one of the few industry sources pointing (correctly) to aggressive pricing by the carriers in a lead up to severe margin deterioration….Now, Lewis and his team find price discipline has strengthened noticeably.
So the effect is the same, but the cause isn’t as clear-cut as the monopoly argument suggests (an argument that ignores the impact of similar consolidation in the hospital industry). That’s not to say a top-heavy insurance market isn’t part of the problem. And as Lewis notes, employers do buy in when Obama and the Democrats “rail at what may be termed oligopolistic behavior of carriers in certain markets.” But as the Congressional Budget Office said when evaluating the potential impact of a repeal of the health insurance industry’s antitrust exemption:
Enacting the legislation would have no significant effect on the premiums that private insurers would charge for health insurance.
Subscribe in RSS Reader
