By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
Health Works CollectiveHealth Works CollectiveHealth Works Collective
  • Health
    • Mental Health
    Health
    Healthcare organizations are operating on slimmer profit margins than ever. One report in August showed that they are even lower than the beginning of the…
    Show More
    Top News
    improving patient experience
    6 Ways to Improve Patient Satisfaction Within Hospitals
    December 1, 2021
    degree for healthcare job
    What Are The Health Benefits Of Having A Degree?
    March 9, 2022
    custom software development is changing healthcare
    Digital Customer Journey Mapping and its Importance for Healthcare
    July 21, 2022
    Latest News
    How Probate Planning Shapes the Future of Your Estate and Family Care
    July 16, 2025
    Beyond Nutrition: Everyday Foods That Support Whole-Body Health
    June 15, 2025
    The Wide-Ranging Benefits of Magnesium Supplements
    June 11, 2025
    The Best Home Remedies for Migraines
    June 5, 2025
  • Policy and Law
    • Global Healthcare
    • Medical Ethics
    Policy and Law
    Get the latest updates about Insurance policies and Laws in the Healthcare industry for different geographical locations.
    Show More
    Top News
    Debunking Another Eco Scare
    August 20, 2011
    How 12 Million are Putting “The Big C” Behind Them
    September 21, 2011
    Weekly Roundup: Eyeing the Solutions
    October 23, 2011
    Latest News
    How Health Choices and Legal Actions Intersect After an Injury
    July 16, 2025
    How communities and healthcare providers can address slip and fall injuries with legal awareness
    July 16, 2025
    Let Your Lawyer Handle the Work Before You Pay Medical Costs
    July 6, 2025
    Top HIPAA-Compliant Messaging Apps for Healthcare Teams
    June 25, 2025
  • Medical Innovations
  • News
  • Wellness
  • Tech
Search
© 2023 HealthWorks Collective. All Rights Reserved.
Reading: Health Insurance Monopoly
Share
Notification Show More
Font ResizerAa
Health Works CollectiveHealth Works Collective
Font ResizerAa
Search
Follow US
  • About
  • Contact
  • Privacy
© 2023 HealthWorks Collective. All Rights Reserved.
Health Works Collective > Policy & Law > Health Reform > Health Insurance Monopoly
BusinessHealth Reform

Health Insurance Monopoly

JohnCGoodman
JohnCGoodman
Share
6 Min Read
Image
SHARE

The single most important feature of the Affordable Care Act (ObamaCare) is the establishment of a health insurance exchange where people will be required to buy health insurance if they are not insured by their employer or a government plan. As envisioned by Stanford professor Alain Enthoven, an early proponent of the idea, the exchange will be a model of competition… well…make that managed competition. (More on the “managed” part in a future Alert). But rather than move toward a competitive world, we seem to be moving toward the opposite extreme: monopoly. Major consolidation is underway both on the provider and insurer sides of the market. And while this trend was already underway before Barack Obama became president, without doubt it is accelerating because of ObamaCare. The graph below shows what things look like in the market for commercial insurance in major Texas cities:

  • Blue Cross already has 70% of the market in three of the nine largest metropolitan areas.
  • In all of them, and for the state as a whole, more than 60% of all customers buy from only two insurers.

Since the passage of the health reform bill, Harvard Pilgrim has announced its departure from the Medicare Advantage market (leaving 22,000 enrollees to search for coverage elsewhere) and the Principal Financial Group has left the health insurance market altogether (leaving 725,000 people behind). Many other small- and medium-sized insurers are struggling to hold on. What is causing the immediate problem? One big problem is a federally required medical loss ratio (MLR), a term of industry argot that means the percent of premium spent on health care, as opposed to administrative expenses. Before getting into the weeds on this let’s consider the same issue in two related fields: education and private charity. In almost every state, rarely does a session of the legislature adjourn before someone files a bill to require the public schools to spend a certain percent of their income “in the classroom.” How well does this work? Here is Michael Barba’s description in a forthcoming NCPA Brief Analysis:

Nationwide, schools spend an average of about $10,000 per student each year. On average, 60 percent of this is instructional, according to the National Center for Education Statistics (NCES). Instructional spending includes such things as teacher and staff salaries, extracurricular activities such as sports or academic clubs, and classroom supplies. However, each state can define instructional spending as it chooses, and expenses labeled as instructional are often not exclusively classroom expenses. In Texas, for example, the upkeep of vehicles, equipment and computers, as well as food service, travel, property insurance and refreshments for meetings are all considered instructional…

There is a…mandate in California that 85 percent of total school spending must be devoted to instruction, but the mandate is so riddled with exceptions that it allow funds to be diverted to nearly any program district officials see fit.

More Read

Personal Health Record rEvolution
7 Things You Need to Know Before Rebranding Your Practice
Doctors on Google: Manhattan Research Survey 2012
The Global Budget in Your Future
5 Major Challenges in Healthcare Recruitment Today

With respect to private charities, an often used rule-of-thumb is that 85% should be spent on programs and 15% on “fundraising” and “administration.” My advice: Forget the formal accounting and ask: Does the organization own its own airplane? Does the CEO have his own car and driver? Is there an executive dining room? Do they do a lot of direct mail? These questions are far more important than whether the organization is clever enough to classify the expenses as “program” or “marketing” or “human relations.” With respect to health care, the same problems arise. There is no hard and fast definition of what is “administration.” And in competitive markets, none of us have reason to care. Do you care how much McDonald’s spends on “administration”? I don’t. But when the federal government told McDonald’s it could spend no more than 15% of health insurance premiums on “administration,” the company threatened to cut its “mini-med” insurance for 30,000 workers. Overall:

  • The administration has granted 2.7 million workers waivers, so they could avert the loss of their health insurance — in part because of the MLR regulation.
  • Maine has received a waiver to allow a 65% MLR, rather than the 80% or 85% called for in the new law — to keep all its commercial insurers from leaving the state.
    • Three other states (Kentucky, New Hampshire and Nevada) have filed similar waiver requests, and an additional 11 states are reportedly preparing to file them.

But waivers make the problem go away only temporarily. What’s really at issue is a difference of vision about how the health insurance market should be organized. As Scott Gottlieb has pointed out (in a study we covered here), MLR regulations stifle innovation and competition. They are part of a regulatory approach in which health insurance companies are turned into public utilities. On this view, it doesn’t matter that only one or two competitors are left standing. Regulation, not competition, is what ObamaCare officials are counting on to make health reform work.

TAGGED:health care businesshealth reforminsurance
Share This Article
Facebook Copy Link Print
Share

Stay Connected

1.5kFollowersLike
4.5kFollowersFollow
2.8kFollowersPin
136kSubscribersSubscribe

Latest News

paramedics in surgical gloves and masks
How Health Choices and Legal Actions Intersect After an Injury
Health care
July 16, 2025
a woman giving a key
How Probate Planning Shapes the Future of Your Estate and Family Care
Health
July 16, 2025
a woman with kinesio tapes on her back arm
How communities and healthcare providers can address slip and fall injuries with legal awareness
Health care
July 16, 2025
healthcare providers
Hidden Injuries After An Accident: What Healthcare Providers Should Watch For
Infographics
July 15, 2025

You Might also Like

Who Owns Frozen Embryos?

December 30, 2011
BusinessHealth careHospital AdministrationSocial Media

5 Effective Ways to Market Healthcare to Millennials

November 20, 2017

Are Readmissions Always Bad?

September 27, 2011

The Doctor Will See You Now. Really!

May 9, 2012
Subscribe
Subscribe to our newsletter to get our newest articles instantly!
Follow US
© 2008-2025 HealthWorks Collective. All Rights Reserved.
  • About
  • Contact
  • Privacy
Welcome Back!

Sign in to your account

Username or Email Address
Password

Lost your password?