Friday, June 25, 2010

qotd: The private insurance oligopoly

Bloomberg Businessweek
June 24, 2010
WellPoint's Kleinman Sees Health Insurer 'Oligopoly'
By Alex Nussbaum

U.S. health insurers are "moving towards an oligopoly," a process that this year's health-care overhaul will accelerate, the investor-relations chief at WellPoint Inc. said today.

New regulations on administrative spending and premium increases will push some independent insurers out of business or into deals with bigger rivals, said Michael Kleinman, vice president for investor relations, at a Wells Fargo & Co. conference in Boston.

The insurance market is becoming an oligopoly, a market where supply and pricing are dominated by a few companies, "and health-care reform is going to move us in that direction more quickly," Kleinman said. "There are going to be smaller insurers that are not going to be able to survive in this marketplace."

Led by WellPoint, 12 health plans cover two-thirds of the enrollment in the U.S. commercial-insurance market, said Ana Gupte, a Sanford C. Bernstein & Co. analyst in New York, in a June 11 note to clients.

The health-care overhaul is likely to push at least 100 insurers with 200,000 members or less out of the business "as the plans are increasingly unable to invest in the infrastructure and technology to effectively manage care," Gupte wrote.

"Insurance companies should see this reform as an opportunity to improve care and increase competition," (said President Obama in remarks on June 22 touting the health-care overhaul). 

Comment:  President Obama claims that this is an opportunity for insurers to increase competition, yet the very structure of the weakly regulated insurance markets established by the Affordable Care Act will concentrate the private insurers into an anti-competitive, oligopolistic market. 

The insurers will keep 15 to 20 percent of the premiums to sell us plans that cover only 60 to 70 percent of our care, and they won't really have to compete with each other to do that. And this outrageously expensive scheme allegedly was to promote competition?

Forget oligopolistic competition! Let's throw out the middlemen and establish our own public monopsony - a single payer national health program. That's market control that works for the benefit of us instead of the insurers.

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