Private insurers' control of the marketplace (AMA report)
(Today’s message addresses one of the most important perversities in our flawed system of funding health care. It needs to be included in every dialogue on reform. Please share this message with others who really do care about the future of health care in America.)
American Medical Association
Competition in Health Insurance
A Comprehensive Study of U.S. Markets
2005 Update
The study’s purpose is two-fold: first, to identify problem markets where competition is diminished and second, to prompt discussion about the long-term impact of consolidated health insurance markets on the health care system. This year’s study demonstrates that competition is undermined in hundreds of markets across the country.
Our study shows unequivocally that physicians across the country have virtually no bargaining power with dominant health insurers and that those health insurers are in a position to exert monopsony power. In 280 of the
294 markets surveyed, one health insurer accounts for at least 30 percent of the combined HMO/PPO market.
In terms of market concentration (HHI or Herfindahl-Hirschman Index, a measure of market concentration used by the Department of Justice), the study found the following:
In the combined HMO/PPO product market, 95 percent (279) of the MSAs (metropolitan statistical areas) are highly concentrated (HHI>1800).
In the HMO product market, 99 percent (290) of the MSAs are highly concentrated (HHI>1800).
In the PPO product market, 99 percent (293) of the MSAs are highly concentrated (HHI>1800).
While a number of large health insurers (including WellPoint and United) are posting record profits, premiums for consumers have increased without any increase in benefits. Instead, consumers are paying more out-of-pocket for their health care, through increased deductibles, co-payments and co-insurance. It is clear that patients - the ultimate consumers of health care - are not benefiting from these mergers.
The American Medical Association (AMA) has long been concerned about the impact of consolidated markets on patient care. Today it appears that the physician’s role as patient advocate is being systematically undermined as dominant insurers impose take-it-or-leave-it contracts that directly impact the provision of care and the patient-physician relationship. This role has never been more important. Physicians have a professional and ethical obligation to their patients; health insurers’ primary legal obligation is to their shareholders.
The AMA believes that it is time to reexamine the legal landscape that has allowed unfettered consolidation of health insurance markets. If not corrected, the imbalances in the marketplace will have serious negative long-term consequences for the health care system.
AMA press release:
http://www.ama-assn.org/ama/pub/category/16197.html
Full report:
http://www.ama-assn.org/ama1/pub/upload/mm/368/competitionstud_406.pdf
Comment:
By Don McCanne, M.D.
This study provides one of the most important additions to the overwhelming body of evidence confirming the principle that private insurers should no longer control health care funding.
This report discusses the monopsony (single buyer) power of private insurers. Through consolidation, private insurers now control the markets both as monopolies and as monopsonies.
By using the contracting process to gain control of the providers of health care, the private insurers have gained monopolistic control of the market in which they sell their insurance products. By gaining control of patients through their restricted-panel insurance products, the private insurers have gained monopsonistic control of the market in which they purchase their health care services and products.
Free markets promote fair pricing. Monopolistic and monopsonistic control of markets drive prices up while reducing investment in products and services.
What better example could there be than these very expensive and highly profitable private insurance plans that are leaving patients much more exposed to the costs of health care.
Market perversities absolutely mandate government intervention. It would require a treatise to explain why a simple increase in regulatory oversight would be totally inadequate to correct the perversities in our private insurance system. Suffice it to say that it is time for the government to take over the funding of health care through a single payer program of national health insurance.