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Bust Up the Health Insurance Trusts
Years ago I worked at an agency in Washington called the Federal Trade Commission. The FTC predates the New Deal. It was set up in 1914 during the administration of Woodrow Wilson, at a time when many of America’s industries had combined into giant trusts that had enormous market and political power. The FTC was designed to root out such unfair practices. It ought to take on the health insurance trusts.
A few weeks back I mentioned that my health insurer here in California is Anthem Blue Cross. So far, my group policy hasn’t been affected by Anthem’s planned rate increase of as much as 39 percent for its customers with individual policies — but the trend worries me, as it should everyone. Rates are soaring all over the country. Insurers have been seeking to raise premiums 24 percent in Connecticut, 23 percent in Maine, 20 percent in Oregon and a wallet-popping 56 percent in Michigan. How can insurers raise prices as much as they want without fear of losing customers?
Astonishingly, the health insurance industry is exempt from federal antitrust laws, which is why a handful of insurers have become so dominant in their markets that their customers simply have nowhere else to go. But that protection might soon end: President Obama on Tuesday announced his support of a House bill that would repeal health insurers’ antitrust exemption, and Speaker Nancy Pelosi signaled that she would put it toward an immediate vote.
This is promising news. Forcing insurers to compete for our business would do at least as much good as the president’s new proposal to give the federal government, working with the states, the power to deny or roll back excessive premiums. The fact is that half of the states already have the power to approve rates and they don’t seem to be holding insurers back much.
Big health insurers say they have no choice because younger and healthier people are dropping their coverage. But this can’t be the whole story because insurers are making boatloads of money. America’s five largest health insurers made a total profit of $12.2 billion last year; that was 56 percent higher than in 2008, according to a report from Health Care for America Now.
It’s not as if health insurers have been inventing jazzy software or making jet airplanes. Basically, they just collect money from employers and individuals and give the money to providers. In most markets, consumers wouldn’t pay this much for so little. We’d find a competitor that charged less and delivered more. What’s stopping us? Not enough choice.
More than 90 percent of insurance markets in more than 300 metropolitan areas are “highly concentrated,” as defined by the Federal Trade Commission, according to the American Medical Association. A 2008 survey by the Government Accountability Office found the five largest providers of small group insurance controlled 75 percent or more of the market in 34 states, and 90 percent or more in 23 of those states, a significant increase in concentration since the G.A.O.’s 2002 survey.
Anthem’s parent is WellPoint, one of the largest publicly traded health insurers in America, which runs Blue Cross and Blue Shield plans in 14 states and Unicare plans in several others. WellPoint, through Anthem, is the largest for-profit health insurer here in California, as it is in Maine, where it controls 78 percent of the market. In Missouri, WellPoint owns 68 percent of the market; in its home state, Indiana, 60 percent. With 35 million customers, WellPoint counts one out of every nine Americans as a member of one of its plans.
Antitrust laws are supposed to prevent this kind of market power. So why are giant health insurers like WellPoint exempt? Chalk it up to an anomaly that began seven decades ago in the quaint old world of regional, nonprofit Blues. They were created in part by hospitals to spread the costs of expensive new equipment and facilities over many policy holders. Collaboration was the point, not competition. The 1945 McCarran-Ferguson Act made it official, exempting insurers from antitrust scrutiny and giving states the power to regulate them, although not necessarily any power to regulate rates.
The system worked fairly well until about two decades ago when insurers began morphing into publicly held, for-profit cash machines. A new breed of medical entrepreneur saw opportunities to profit from a rapidly aging population eager to get every new drug and technology that might extend their lives, and a government committed to doling out hundreds of billions of dollars in Medicare and Medicaid.
With size has come not only market power but political clout. Big for-profit insurers deploy enough campaign money and lobbyists to get their way with state legislators and insurance commissioners. A proposal last year to allow California’s Department of Insurance to regulate rates, for example, died in committee. These companies have even been known to press states to limit how many other health insurers they license.
And when they can’t get their way, insurers go to court. In Maine — one state that aggressively regulates rates — WellPoint’s Anthem subsidiary has sued the insurance superintendent for reducing its requested rate increase.
Political clout can be especially advantageous at the federal level, as the big Wall Street banks have so brazenly demonstrated. Over the past two and a half years, WellPoint’s employees and associates have contributed more than $922,000 to federal political campaigns, and the company has spent $7.8 million lobbying Washington policymakers, according to the Center for Responsive Politics. It should not be surprising that WellPoint was one of the leading opponents of the public insurance option, which would have subjected it to competition even where it had sewn up the market.
Antitrust is no substitute for broader health care reform, but it’s an important prerequisite. If a handful of giant health insurers are allowed to dominate the industry, many of the other aspects of reform (establishing insurance exchanges, requiring people to have insurance, even allowing consumers to buy insurance across state lines) won’t bring down the price of insurance.
Regardless of what happens at the White House’s health care meeting today, we’ve got to make sure health insurers compete for every one of our dollars. The Federal Trade Commission should launch an investigation immediately, and end the health care trusts.
Robert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, Aftershock: The Next Economy and America’s Future; The Work of Nations; Locked in the Cabinet; Supercapitalism; and his newest, Beyond Outrage. His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.
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30 Comments so far
Show AllBust them up or string them up. I prefer the latter.
This industry needs to be relegated to selling insurance for cosmetic surgery for pets.
Set these folks free to earn a more honest living, say as hookers, drug dealers, and pornographers.
Single-payer. The only answer. End of discussion.
q
The insurance company execs. made sure that Obamacare will enable their multi-million dollar pay packages and "retreats" to keep increasing. They will be also be buying more luxurious corporate jets once Obamacare passes.
Thank you for posting the article. I found it very interesting and I feel I have a better understanding of the issue.
Come on Robert. Wake up and smell the coffee. They did not listen when you called for the same of the banksters what makes you think they will do so now with corporate health industry?
Why not read a book like David Korten's When Corporations Rule the World?
Game over. This article is nothing more than coffee house lip service.
Let Robert write and conplain all he wants. IMO, although it looks bad until bullets start flying there is still room for talk and change for the better. Look at Robert as a lone voice in the Wilderness. He hurts no one and just maybe he will get a reader/listener to think. A fire starts with one spark.
Reich has made a cogent argument for single payer. When we already know that Washington is "broken" as the current meme puts it, we know it is incapable of acting on anyone's behalf not slipping them a few million, regulators can't regulate (SEC ring a bell?)... the monied interest will game the system. The solution is to cut them out altogether. Why try to regulate thugs and legalized organized crime? They broke it just like Bear Sterns did, and they no more deserve to be bailed out by taxpayers than Goldman Sachs did.
It is business as usual to auction us off to the highest bidder. Some time before the whole thing sinks beneath the waves, it would be nice to have our representatives in Washington acknowledge that they are part of the problem. It's not JUST the insurance companies; it's also the congress that takes their money and acts on their behalf instead of ours.
No competition between government and the private companies, right Mr. Reich? Government monopolization of health care is wrong. Let the companies and government compete.
You apparently aren't aware that there is no such thing as government monopolization of healthcare. As far as what's being proposed, which I'm completely against, is the government forcing Americans to buy products from a monopolized industry. Perhaps, you don't understand the word monopolization. Usually your posts are echoes of Glenn Beck lines, so I'm not sure why I'm laying pearls before swine, so to speak.
Up is down, blah blah blah…
The only thing that makes any sense, is single payer.
What would the magic of the marketplace do. If competition lowered profits to 0 how much would be saved. My experience with non profit Blue Cross Highmark in Pittsburgh is that it could lower costs by at most 7%. As price competition increases the more standard methods of lowering costs come more and more into play, denial of claims, recission, denial of choice of doctor and procedure and of course denial for preexisting conditions. Isn't the magic of the marketplace wonderful? Don't we love how it controls costs for us. Much better than heavy handed tampering by the big bad government--right?
Can vampires be drowned in a bathtub?
Only if it's a silver bathtub.
That's why the banksters require the obscene bonuses that so appal and infuriate ordinary people. Do you have any idea how much a solid-gold bathtub costs?
Me neither. Even though I'm one of the bacteria composing the ring.
· Yr Obd't Servant
Bobby, you need to get over this public option fetish. Join with us, the majority of the American people, to discuss and promote MEDICARE FOR ALL. The insurance companies don't need to be regulated, they need to be entirely removed from our healthcare system.
The House will probably pass this, because ALL members are up for reelction.
Not the Senate, where the 33 Senators who are up for reelection will vote for it and the others, against.
Big Pharma and the medical insurance companies have way too much money and time invested in this bill to let it die.
I have noticed that a number of "liberal" senate democrats up for re-election this year are putting full faith in Obama and voting for TARP, Obamacare, Bernanke and other pro-corporate, anti-worker legislative actions.
Being incumbants they don't think they are vulnerable to a Scott Brown upset.
I think that EncinoM was the hero of an idiotic movie released in the 1990's. It was about a revived caveman. EncinoM's ideas are just as stale.
Senator Harken called the lack of healthcare for the sick and disabled, a kind of discrimination. Good way to look at it. Busting the health insurance trusts and discrimination are some of the best legal arguments in my opinion.
Eze,
Yes, Senator Harkin co-sponsored the Americans with Disabilities Act (ADA,) back when he was a progressive. It was ground-breaking legislation in limiting some barriers for pwd and a significant landmark on the road toward creating a human environment for all persons in the US.
I can't remember exactly when Harkin was first elected to the senate (pretty sure it was 1972, as an anti-war candidate, so he has been in office for a VERY long time, has become VERY wealthy, and governs now from the vantage of a complacent, elite incumbent. He is no longer a progressive unless that somehow benefits him.
Throughout this entire healthcare disaster, his contribution has been to promote an emphasis on 'wellness.' He has been, in a nutshell, worthless.
Harkin's state, Iowa, has a much higher percentage of persons who are forced to purchase market-rate policies, so we ae being victimized at unprecedented levels. I just received notice of an almost 20% increase his weekend. Cost was already more than I can afford.
Several insurance corporations have headquarters in Des Moines and Harkin has become accustomed to their largese when it comes to campaign contriubtions. So it seems to be ok with him that the rape, pillage and plunder continue on.
As someone 4 years older than Robert, perhaps his memory is not as good as mine for the Rod Serling television series called The Twilight Zone. Each episode ended with a shocking, unexpected twist. "And that's the way it is, in the Twilight Zone."
My position is that this 30-40 year fight over health care reform has led us now to the unexpected twist. While our mouths hang open, we find we are living the case where all distinction has evaporated between Capitalism and Organized Crime. White and black hats have all become gray hats.
Reading Reich's proposal, I could only envision Eliot Ness bursting into the offices of US Health Care Executives and spraying their walls with a Tommy Gun, while other agents run about swinging axes at computers. Agents of the FTC could not do what Reich imagines because he imagines a =law abiding= nation. My belief is that such a view today is a carefully manufactured and cultivated illusion. Americans are living in a totally self-serving, corporate oligarchy which collectively is a larger repository of power than all American governments put together. This creature began to flex its muscle more noticeably when Billary tried to reform health care. It does not intend to let us have significant reform, and that's that.
T.R. Reid shows us in his latest book a range of answers that other nations have found. I, myself, was a resident of Canada more than 30 years and know that their transition to universal health care was eventually mediated by Conservative governments, not Liberal or Socialist. [I have nice memories of my private conversation with ex-Prime Minister John Diefenbaker.]
The 1960 concept of The Ugly American not only lives, it has morphed into the 2010 persona of The Hideous American.
"all distinction has evaporated between Capitalism and Organized Crime."
Excepting that organized crime is subject to legal penalties. The U.S. value-negative version of unregulated capitalism brings only rewards and incentives.
Incorrect, Dr. Reich. Replace them with single payer.
If competition works you'd find it in all the other industrial countries. But you don't because all the other countries use single payer or some variation of it.
When the useless cattle breeders on Captiol Hill decide on a plan that they are willing to accept for themselves and their families, then we know the plan will be worthwhile for the rest of us.
sLotta BS from the politicos.
Airline pilots have to get re-certified every 6 months.
They lose about 300 people each yr to mistakes.
Drs, nurses and pharmasists don't have to...they lose 90,000 people a yr to mistakes.
Take care of high insurance costs, not by tort reform, but by competency reform.
Also, by asking your Senators to support HR 4626 which has PASSED the house...it removes anti-trust exemptions from the insurers. CALL NOW.
This one is so obvious that all House Republicans except 19 voted for this bill. I sent a message to my US Senators through MoveON.org. My message started with, "You have waffled on too many bills that should have helped the Democrats who voted for you along with Republicans who didn't. For once, stop listening to the lobbyists in their Armani suits and start listening to the voters who put you in office".
Breaking up the Insurance trusts will NOT create lower prices and more competition. IT will add even MORE costs to an already expensive system.
The nature of Insurance is that lower costs are the result of a much larger "pool" of insured. When you break up the larger insurers into smaller units, any given unit will have a much smaller pool of insured and will have to charge higher premiums.
Doctors and Hospitals will need ever larger billing departments to deal with multiple vendors and insurance plans with each setting their own coverage.
The marketplace is just NOT efficient when it comes to delivering Health Care. Insurance companies should not be playing a role in delivering basic health care.
There is a fundamental contradiction between for profit health care and one of the principle precepts of medical ethics, namely, "First, do no harm." This contradiction is apparent in the insurance company's every day practices of denying or rescinding coverage, its co-pays, its deductibles and its limiting patient access to specialists and expensive treatments, all of which, by putting profits first, endanger patients. No surprise, then, that theres also a fundamental contradiction between the for profit health care system and the raison d'etre of health care itself, namely, delivering the best possible care to everyone. That's because the privatized systems skim off at least 30 percent of the health dollar for administrative costs and profits, an amount large enough to take care of the 45 million uninsured Americans whose annual death rate (just from being uninsured) is 0.1 percent, about the same as the death rate from undergoing general anesthesia. Which brings us to what's debatably one of the biggest contradiction of them all, a government that's supposedly of, for and by the people that puts the laissez faire ideology before the lives and well-being of its people, an ideology which for reasons of greed, simply can't deliver the best possible health care to everyone, or, for that matter, any health care whatsoever to a large percentage of the population. Not only clings to a failing system but refuses even to consider a system that's up to the task at hand, specifically, a single payer system such as Medicare for all. And what does it mean when a government puts the public at risk time after time rather than changing course? Which begs the question, what are we going to do about it?
THE CORE OF THE ISSUE IS EXTREMELY SIMPLE:
"It’s not as if health insurers have been inventing jazzy software or making jet airplanes. Basically, they just collect money from employers and individuals and give the money to [health care] providers."
The so-called "health insurers" have absolutely nothing whatever to do with delivering health care to anyone. The only thing they produce is profit for themselves by SKIMMING OFF THE TOP OF YOUR CONTRIBUTIONS prior to passing along the leftovers to those who actually do provide health care services. And the less they pass along to the real health care providers the greater their profits.
In other words, the argument has nothing whatever to do with whether the provision of health care itself should or should not be a profitable endeavour, should or should not be "socialized", should or should not include holistic medicine, or any of the other myriad distractions. The argument, in fact, isn't about health care at all. It's about whether an intermediary process should be profitable on the basis of its entirely value-negative money handling.
The answer to that should be obvious to the meanest intelligence, even including proponents of the theoretical benefits of capitalism itself. Furthermore, it is completely unrelated to the issue of how many "competitors" should be involved in splitting the skim. You might as well discuss re-organizing competition amongst mafia crime families.
Lobbyists should be equated with with Deer Hunting Season. EXCEPT HAVING A YEAR LONG "OPEN SEASON" ON THEM AND A 20 SLIME-BALL (LOBBYIST) LIMIT. Maybe then the coutry could begin to heal from the destruction wrought by the greedy, corporate, pigs, and their minions....But that's just my opinion and I could be wrong.....NOT ! ! ! ! !