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Commentary

Examining the insurer-government bout

Marketplace Staff Oct 21, 2009
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Commentary

Examining the insurer-government bout

Marketplace Staff Oct 21, 2009
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TEXT OF COMMENTARY

Kai Ryssdal: There was big news on the health-care debate today out of an unlikely source. The House Judiciary Committee has voted to strip health insurance companies of their anti-trust exemption. That is, their ability to get together and fix prices. It’s a luxury the industry has enjoyed since the end of the Second World War. There’s a plan to do the same thing in the Senate. As commentator Robert Reich is about to explain, the president’s been talking about it, too. Health insurance is the latest skirmish in the health-care fight.


ROBERT REICH: Suddenly, it seems, the White House is blasting away at private insurers. Why? Because the insurers broke the deal the White House thought they’d agreed to last January. That deal was simple. Private insurers would support new health-care legislation — even requiring they take people with pre-existing conditions — because the insurers would get 25 [million] to 30 million new paying customers, and the profits that go with all these new customers.

But in recent weeks private insurers have done an about-face. They’ve been running ads questioning the emerging legislation. They’ve even released a study claiming that a Senate version of health-care reform would cost middle-class consumers a bundle. The easiest explanation for the insurer’s about-face is Congress’s growing reluctance to require that all Americans buy insurance, and penalize them if they don’t — especially young, healthy adults.

The insurers are right to worry. If the young and healthy don’t buy in, the insurers’ costs are going to rise. That’s because, with no limit on pre-existing conditions, a larger proportion of the insured will be older and sicker.

But if the insurers were in tough competition with each other, they’d have every incentive to find ways to keep prices down even though the population they serve may be older and sicker. They’d use new technologies, minimize unnecessary tests, pay physicians and hospitals for outcomes rather than inputs, and help prevent healthy people from becoming sick.

But the truth is they don’t compete intensely in most markets. And they’d rather not, which is why their abrupt about-face on the deal they struck with the White House opens insurers to the biggest threat of all: as the president said a few days ago, removal of the exemption the industry has under federal anti-trust laws.

The president could have gone a step further and committed himself to a public insurance option. That would guarantee more competition, and give the private insurers a better run for their money — and their profits.

RYSSDAL: Robert Reich is a professor of public policy at the University of California Berkeley.

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