Why competition among insurers is not the answer

Both Obamacare and the AHCA bet on the concept that competition among insurers will control health insurance premiums. Why they believe that is a mystery to me. 

Only a relatively small portion of any premium is even subject to competition, less than 10%. The bulk of any premium is health care spending. In addition, as the graphic below shows, nearly all states have a process to review and approve premium change requests by insurers. 

Betting on competition among insurers to lower premiums is a losing bet. 



1 reply »

  1. As suggested by your post, neither D’s nor R’s believe competition is the answer – as all know health insurance is regulated as if it were a utility – where you may have a choice when it comes to heating, but also need electricity. It is the difference between going without a land line and Ma Bell.

    To have competition, it must be at the provider/patient lever, where differentiation is both quality and price.

    It can be done – see lasix and cosmetic surgery.

    So, yes, insurance, as regulated and delivered today, is an impediment to getting competition in place to deliver better cost/benefit results.


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