PA premiums soar as insurers face less competition

Opponents of a public health insurance option for people shopping for health insurance claim it would destroy the competition within the health insurance industry.

Paul Krugman, Nobel-winning economist, asks: "What competition?"

Writing in his blog at the New York Times, Krugman states:  "While the opponents of a private plan say that they’re trying to defend market competition, what they’re actually doing is defending lucrative local monopolies."

Krugman's comment is based on an analysis distributed by Health Care for America Now and entitled, Health-Plan Premiums Soar As Insurers Face Less Competition.  That study found that the health insurance industry is consolidating rapidly and that there is "a startling and consistent absence of competition" in many parts of the United States.

In Pennsylvania, the state's two largest health insurers, Highmark and Independence Blue Cross, virtually control the market for commercial health insurance.  In southeastern PA, Independence Blue Cross has 72 percent of the market, in northeast PA, the Blues plan controlled by Highmark has 63 percent of the market, and in western PA, Highmark has 74 percent of the market. 

The analysis concludes:  "Americans pay for this consolidation in the form of higher health plan premiums, surging insurance company profits, and a growing number of uninsured people.  In many metropolitan areas across the nation, dominant health insurers have prevented new competitors from entering the market and allowed the most powerful hospitals and doctors to raise rates with minimum resistance.  Contrary to the insurance industry's assertions, the low level of health insurance industry competition across the U.S. is unhealthy for individuals, businesses and the economy." 

Krugman cautions against a national health reform plan built around insurance industry competition for another reason:  "The truth is that the notion of beneficial competition in the insurance industry is all wrong in the first place: insurers mainly compete by engaging in 'risk selection' — that is, the most successful companies are those that do the best job of denying coverage to those who need it most."

In Pennsylvania, three Democratic congressmen (Holden, Altmire and Carney) have opposed a public health insurance plan for consumers except as a last resort.  Just what would constitute "a last resort"?  We need to ask them.  If the fact that health insurance premiums for Pennsylvania families grew 6.4 times faster than income over the years of this decade is not sufficient, one wonders what would be. 

Maybe, as Krugman suggests, what they really want to protect is the dominant position of private insurance companies.