The truth about competition in insurance

If you follow my blog at all, you know I’ve never been a big defender of the public option.  I think that a lot of people think it’s single payer lite (it’s not).  Others thing its awesome power will force prices to come down (not likely).  And some think that the fact that it should have less administrative overhead would make it so much cheaper than other options (not likely either).

But I also scoffed at opponents of the piblic option who said it would “limit competition”.  As if competition existed right now.  Quoth the AMA (which is not usually seen as a progressive organization):

The AMA’s most recent look at the health insurance market — “Competition in health insurance: A comprehensive study of U.S. markets,” released Feb. 23 and based on 2009 data — finds that 99% of 313 metropolitan areas tracked would be considered to have “highly concentrated” insurance markets under guidelines used by the U.S. Dept. of Justice and the Federal Trade Commission. In its 2009 version of the study, the AMA found that 94% of metropolitan areas were ranked “highly concentrated.”

Only Miami, Fort Lauderdale, Fla., and Colorado Springs, Colo., are not considered to have highly concentrated markets. But even these metropolitan areas are not deemed to have competitive markets but instead are rated as “moderately concentrated.” The Justice Dept. and the FTC would consider a highly or moderately concentrated rating as a point against a merger or acquisition of plans within the same market.

One insurer held 70% or more of the health plan market share in 24 of 43 states measured, up from 18 in 42 states in the previous year’s study. In 92% of the 313 markets in the report, one insurer held at least a 30% share.

In past releases of its survey, the AMA has noted that insurer market dominance has allowed health plans to force physicians into take-it-or-leave-it contracts. But this year the AMA — echoing other experts — noted that market dominance has allowed plans to give patients take-it-or-leave-it pricing.

Are you getting that?  Competition has gone down since last year.  Almost 100% of markets are highly concentrated, as calculated by the number of available options and their individual market share.  That means there are limited choices available, leaving people at the mercy of rate increases and coverage decreases.  Adding a public option would increase that number significantly, and therefore increase competition.

And that’s the best argument I’ve heard yet for a public option.  I still don’t think we’re going to get one right now, and I don’t think it’s worth sinking the bill over.  But if the insurance industry wanted to make sure that Democrats considered adding one in later, they sure are on the right path.


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