Monday, January 11, 2010

A couple of additional points on health care

The menu of issues on my last post omitted a couple of issues that remain in contention as part of the health insurance reform legislation.

First, the House wants to pull the health insurance industry's antitrust exemption. Now, I'd like to know why they ever had one in the first place! I'm no antitrust expert, but as I understand it, the reasons health insurers are allowed to lobby Congress through a single lobbyist, and compare costs, and share data on "reasonable" expenses for out-of-network coverage -- lots of things -- is because they are not subject to antitrust laws. Antitrust laws are designed to prevent individual marketplace participants from ganging up against the little guy. So, for example, members of an industry can't fix prices in a way that benefits them and hurts consumers. In other words, antitrust laws are designed to protect and promote competition. These laws are designed to prevent companies from forming alliances that become so large that they are monopolies, or from other anti-competitive, unfair behavior that harms consumers.

You can read more about antitrust laws here. However, it seems to me to be pretty clear that health insurers are not an industry that needs to be protected from the antitrust laws in order for things to be fair, i.e., in order for insurers to have fair bargaining power both against each other and, more importantly in my mind, as against consumers.

There are a number of pretty famous antitrust exemptions. For example, baseball teams are exempt from the antitrust laws, allowing them to bargain collectively as one entity. Unions are exempt from antitrust laws so as to provide workers with equal bargaining power with huge captains of industry. But insurance companies? Since they have all the bargaining power, since their premiums are ridiculously high, why on earth do they need special treatment under the law? I've yet to hear or read a single explanation for exempting health insurers from the antitrust laws that makes any sense at all. If we are not going to have a public option that could compete with health insurers, let's at least strip them of their antitrust exemption so they have to compete among themselves!

Second, medical loss ratio. The medical loss ratio is the amount of every premium dollar that goes to paying for medical care. For example, if you had a 95% medical loss ratio, that would mean that your insurer was spending 95% of the premium you paid on health care and only 5% on administrative costs and profits. On the other hand, if the medical loss ratio is 70%, it means that the insurer is spending 30% of the premium dollars it collects on administrative costs and profits. In the absence of a public option, progressives in the House are fighting for an 85% medical loss ratio.

These two provisions are excellent proxies for a public option. Those of us who favor a public option do so because we believe that there is not enough competition in the insurance industry. A public option would have been nonprofit, so the medical loss ratio would have been higher, and premiums, therefore, would have been lower. This lower cost public option would have provided an incentive for insurance companies to reduce their premiums so they could have remained competitive. Removing the antitrust exemption and requiring a high medical loss ratio would have the same effect, stimulating competition and holding down profits.

Both of these provisions are being advocated by the House, which will have to drop its public option if they are to agree on a bill that will pass the Senate. I have yet to see or read comment from the most problematic members of the Senate -- Lieberman (CT), Nelson (NE), Lincoln (AR), Landrieu (LA), Conrad (ND), to name the obvious ones -- saying whether they would vote in favor of a bill with either or both of these provisions.

Once again, folks, if you care -- and if you're chronically ill, you really should -- call or write your members of Congress about these and other issues (see last post, below). You can find your Senator here and your Representative here. Jennifer

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