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Obama Points to the Lack of Insurance Competition, a Problem His Plan No Longer Solves

The Obama administration, in its push to get the House to vote for the Senate's health care reform bill unchanged, is pointing to the serious issue of lack of competition in the health insurance market as a powerful reason for reform. Obama's health care proposal, however, no longer does much to actually solve the problem. From the White House Blog:

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.

Speaking about the lack of competition - a key target of reform - broker Steve Lewis told investors on a conference call organized by Wall Street giant Goldman Sachs:

"Not only is price competition down from year ago (when we had characterized last year's price competition as being down from the prior year), but trend or (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..."

The few elements of this health care reform push that could have helped deal with the issue of "insurers' monopoly" have been removed, and Obama is making no effort to add them back. In fact, his administration is actively trying to suppress attempts by others to reintegrate such measures into the legislation.

Repealing the anti-trust exemption was in the House bill-but it is not in the Senate bill or Obama's health care proposal. Also in the House bill, but missing from Obama's proposal, is a national exchange and a national public health insurance option. All three proposals could have helped with the issue of the monopoly power of insurers.

The Senate bill does, technically, contain money for new insurance co-ops, but Kent Conrad (D-ND) and Max Baucus (D-MT) completely crippled the co-ops with weird restrictions, which will protect the current health insurance companies. The bill calls for one co-op per state, even though that is unfeasible in small/mid-size states, and co-ops are legally prevented from pooling their negotiating power to get better rates with providers. Baucus so crippled the co-ops program that the CBO says they are basically destined to fail.

If Democrats really want competition among many non-profit insurers-like in Belgium, Germany, Japan, and Switzerland-and want to bring down cost, then they need to create a central reimbursement negotiator that would result in an all-payer system. Only when all insurers are paying the same reimbursement rates, can new, small competitors ever hope of breaking into a new market. As long as large size allows the big monopoly insurers to get better rates with providers, you will always have market share snowballing to a few big insurance companies.

The lack of competition, the monopoly power of the insurers, is a huge problem with our health care system. Unfortunately, the Obama administration has not made taking on the big insurance companies a policy priority, and the president's proposal does not take the big steps to fix the problem. If Obama really thought the reports, like this one from Goldman Sachs, were the reason we need health care reform, he would be fighting to include actual solutions to the problem, like repealing insurers' anti-trust exemption, creating a public option, a national exchange, a central reimbursement negotiator (all-payer system), and/or making the co-ops at least workable.

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Jon Walker

Jon Walker is political writer and blogger for FireDogLake. He is an expert on health care policy and the politics of health care reform.

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