So now the Senate is threatening the largest of insurance companies with costly and distracting lawsuits and justice department inquiries if Wellpoint (Anthem Blue Cross)/United Healthcare/CIGNA/Aetna (popularly referred to as BUCA) do not go along with the administration and Congress and their plans for healthreform. By repealing an exemption from McCarran-Ferguson for insurers, it is presumed that price fixing will end and consumers will be better protected from insurance company gouging and insurance premiums will subsequently be reduced.
Nice try. Wrong policy.
As I have repeatedly stated here and via Twitter, insurance companies have an oligopoly in the health insurance markets. An oligopoly is extremely limited competition as compared to monopoly as no competition.
The oligopoly is not a natural occurrence. Rather, the oligopoly is the direct result of state and federal laws that protect the oligopoly and limit competition. Yes, your federal and state legislators and executives have enacted legislation and enforced laws that provide limited competition for the benefit of the insurance companies that they rail against.
Imagine that you are a parent handing your car keys to your 15 year old child and then you ground the 15 year old for a year when they take your car out for a drive. In threatening the repealment of McCarran-Ferguson, Congress is doing the same thing to the insurance companies that it has enabled. For one, it is disingenuous. Secondly, it will prove ineffective at helping consumers.
More competition is what will help consumers. Insurance companies do not want competition and, thus, the states enact laws that inhibit competition. Employers and insurance companies are not the only suppliers of medical insurance. Competition can easily be spawned through innovation among non-employer groups.
How do states inhibit competition and enable the oligopoly?
State laws prohibit group medical insurance from being held by any group other than an employer, a union or the United States government. There exist thousands upon thousands of other groups from which an individual could purchase health insurance easily providing intense competition. However, state laws declare that it is illegal and unapprovable for non-employer groups to hold a medical insurance contract. Funny thing is, states allow non-employer groups to hold life insurance contracts, disability insurance contracts, Medicare Supplment contracts, and others. Why not medical? Because state run Blue Cross plans do not sell many of these other types of products or have less money at stake. Blue Cross Blue Shield plans typically hold the dominant share of market in each state and are directly overseen by state legislatures or state insurance departments – basically extensions of state governments.
How does the United States Congress and President enable the oligopoly in medical insurance markets?
Inaction by Congress and executive branch in exempting non-employer groups from the Employee Retirement and Income Security Act (known as ERISA) precludes multi-state/national non-employer groups from offering insurance on the same playing field as multi-state employers (think Fortune 500), unions (think AFL-CIO) and the United States government itself. Large employers, unions and the federal government are all exempt from being governed by the onerous, anti-competitive state laws mentioned above. Simply put, individuals and small business owners are not special interests when it comes to Congress taking care of their constituents.
Inaction by Congress and executive branch in regulating insurance on a national basis, rather that current patchwork of the 50 states and District of Columbia stifles competition and maintains the costly overhead associated with insurance company compliance that is passed on to consumers. There is a solution, but it sits locked up in committee. H.R. 1880, a bipartisan bill authored by Rep. Bean of IL, provides for insurers, insurance agencies and producers the ability to be regulated by one entity instead of 51. This will allow for the eventual purchase of insurance from accross state lines and reduce reporting and administrative burdens thereby reducing cost of insurance overhead and increasing competition.
Congress is correct that an oligopoly exists.
To eliminate the oligopoly, competition must be increased, not amongst insurance companies, but amongst insurance markets. Non-employer groups are essential to competition in life insurance, disability and accident markets. They must also be allowed to compete in medical insurance markets.
Congress must end its protection of the oligopolies by removing and/or exempting markets from the anti-competitive structure of state insurance laws.
