I’m been somewhat skeptical about the Enzi AHIP bill, but in the spirit of fairness wanted to carefully evaluate the potential of the bill to address its main driver – the lack of affordable health insurance.
I’m even more skeptical now.
The growing trend to consolidation in the health insurance industry would likely be accelerated by the bill proposed by Sen. Mike Enzi (R) WY. Enzi’s bill would, among other things, strip out much of the states’ power to regulate health insurance, establish a uniform benefit plan, and end many of the restrictions on insurance underwriting. (this last will actually serve to increase the number of uninsured as they will not be able to meet strict underwriting guidelines)
Proponents of Enzi’s bill claim that it would enable small businesses to pool their buying power, thereby getting better deals from insurers. While that makes sense in a free market, the market for health insurance is anything but free. In fact, with most local markets dominated by a single carrier, I’m not clear as to how group buying will help any employer gain any pricing power.
The health insurance market has become an oligopoly, generally defined as a market where 4 or fewer sellers control more than 40% of the market. In reality, a study released by the American Medical Association and supported by a newly-released GAO report, clearly shows we have passed this benchmark and are now approaching monopoly status in many markets.
Of the 294 metro areas studied by the AMA, 56% were dominated by a single insurer who controlled over 50% of the market. In essentially all of the 294 markets one insurer had market share of at least 30%.
Nine states are dominated by a single health plan, one of the Blues, with over 50% market share. And this trend has accelerated considerably over the last four years.
My sense is that Enzi’s bill would do little to address the core problem of health care coverage – it is just unaffordable for many small businesses and their employees. Enzi et al seem to think that buying power alone will help solve the problem; clearly current market conditions make that argument moot.
What does this mean for you?
Yet another opportunity to study the process of furniture arrangement on the Titanic.
May
2
Thanks for writing about this, Joe, I’ve been watching it as well. I thought that larger companies could get lower rates by spreading risk better than smaller companies, and that would be another way small businesses could get lower rates by pooling together. Is that not correct?
Also, why are they writing this bill to supersede state law? Is it because they realize that the only way to make insurance affordable is by removing these regulations so they want to prevent a situation where the bill doesn’t actually make insurance affordable? Or is it because the authors of the bill don’t like regulations simply because they don’t like regulations? I thought this plan would be a good idea if only it abided by state laws.
As you correctly point out, there is no “market” for health care coverage, so allowing small business to “play the market” amounts to nothing, altough the carriers may respond with some inital “savings” to show how grateful they are for the other giveaways in the bill.
I am beginning to think that the best answer is to expand Medicare to include all Americans, however, establishing required premiums that would tend to push consumers towards the “free market” at higher annual incomes while allowing everyone to have at least the basic care Medicare provides.
Competition would, in fact, spur the industry to respond — or else they would have to fold their tents…
I think you mean on the Hindenberg…
Since I am not a healthcare expert, I have a few questions regarding AHP’s. First, arent’t we talking about enough small businesses banding together to be able to buy insurance on the same terms as a large employer with a comparable number of employees? Second, if this is the case, aren’t there both administrative and underwriting cost savings related to serving a large group that justifies a lower premium per employee? Finally, if the small business group were large enough (say 10,000-20,000 employees altogether), couldn’t they just pool their resources and self-insure or buy reinsurance for individual employee costs beyond $100,000 in a given year if they deemed the insurance company quote for conventional insurance on the group to be too high?
BC – yes and no. the main point of my post was that AHPs do NOTHING to resolve the underlying problem of affordability. they are, at best, playing at the margins.
in order, here are the answers to your questions.
1. the underwriting, premium collection, and administration processes for a large multiple-employer trust are by definition more costly than for a large employer. Large employers absorb the costs that the trust would have to. 2. the admin and underwriting work has to be paid for somewhere; there is no free lunch. 3. Yes, many trust did self-insure, and that’s one reason they all went belly-up in the nineties; reinsurance rates became unaffordable and reserves were inadequate.
If you define “market” as a metro area or a state for purposes of defining competition in health insurance, then you can make the argument that competition does not exist. I belive some of the good folks at the FTC poked a few holes in that logic in Health Affairs recently.
Why haven’t the self-insured eliminated all the benefits, since they too avoid state regulation?
Joe,
You write that the health insurance market is becoming an oligopoly. Actually, it always has been one. The local Blues plan by itself has over 40% of the market in hundreds of counties and perhaps dozens of states…and the Blues share was higher 30 years ago than it is today.
WellPoint is only turning a bunch of local oligopolists into a national one.