Viewing entries tagged with 'Competition'
FACT CHECK: Health Plan Competition and Provider Consolidation
Posted by The Campaign on March 10, 2010 at 7:44 AM
Health insurance plans operate in highly competitive markets across the country and consumers have numerous choices in the types of plans and in insurers. To the extent that research has raised the question of competition as a factor in rising health care costs, it has pointed to consolidation among providers, not health plans.
Key facts about health plan competition:
· There are eight or more health insurers in each of the top 40 metropolitan statistical areas (MSAs) in the nation.
· Physicians contract, on average, with about a dozen health plans. Only about half of their practice revenues come from health plan contracts while the rest comes from the federal government through Medicare and Medicaid.
· Aggressive competition among health insurance companies has also increased the number of product options available to both consumers and their employers. New types of products—like consumer-directed health plans, or HSAs—afford more choices, in addition to the many and varied PPO, HMO, POS, and indemnity options, both fully insured and self-funded.
· The states which are allegedly the most concentrated actually have some of the lowest health care costs in the nation.
· The list of participating insurance plans that are available through every state insurance department show that there are a variety of choices for consumers.
Additional information on provider consolidation:
· Massachusetts Attorney General Martha Coakley recently issued a report on hospital consolidation in the state. According to a recent Boston Globe story, the report “points to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs” and “found no evidence that the higher pay was a reward for better quality work or for treating sicker patients”.
· A report from the Robert Wood Johnson Foundation found that hospital consolidation has contributed to rising health care costs. The report stated: “Research suggests that hospital consolidation in the 1990s raised inpatient prices by at least five percent and likely significantly more. Prices increase 40 percent or more when merging hospitals are closely located.” The report also found that higher hospital prices do not translate to higher quality of care: “[A] narrow balance of the evidence and the evidence from the best studies indicates that hospital consolidation more likely decreases quality than increases it.”
· According to a brief from the National Institute for Health Care Management: “With only a few exceptions, results consistently demonstrate that hospital consolidations result in higher prices for hospital services. The magnitude of price increase varies by methodology and by the characteristics of the markets under study, ranging from low-end estimates of 5 percent price hikes to increases of more than 50 percent.”
· The Federal Trade Commission and the Department of Justice held extensive health care hearings in 2002 and 2003, and in their subsequent report noted the correlation between hospital concentration and high hospital prices: “Most studies of the relationship between competition and hospital prices have found that high hospital concentration is associated with increased prices, regardless of whether the hospitals are for-profit or nonprofit.”
· Recent reports show how much hospital consolidation has increased in recent years, indicating that:
o The vast majority (88 percent) of U.S. Metropolitan Areas have highly concentrated hospital markets.
o Hospitals markets have increased their concentration by 47 percent over 13 years.
FACT CHECK: Health Plan Competition and Provider Consolidation
Posted by The Campaign on February 23, 2010 at 2:31 PM
Health insurance plans operate in highly competitive markets across the country and consumers have numerous choices in the types of plans and in insurers. To the extent that research has raised the question of competition as a factor in rising health care costs, it has pointed to consolidation among providers, not health plans.
Key facts about health plan competition:
· 
There are eight or more health insurers in each of the top 40 metropolitan statistical areas (MSAs) in the nation.
· Physicians contract, on average, with about a dozen health plans. Only about half of their practice revenues come from health plan contracts while the rest comes from the federal government through Medicare and Medicaid.
· Aggressive competition among health insurance companies has also increased the number of product options available to both consumers and their employers. New types of products—like consumer-directed health plans, or HSAs—afford more choices, in addition to the many and varied PPO, HMO, POS, and indemnity options, both fully insured and self-funded.
· The states which are allegedly the most concentrated actually have some of the lowest health care costs in the nation.
· The list of participating insurance plans that are available through every state insurance department show that there are a variety of choices for consumers.
Additional information on provider consolidation:
· Massachusetts Attorney General Martha Coakley recently issued a report on hospital consolidation in the state. According to a recent Boston Globe story, the report “points to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs” and “found no evidence that the higher pay was a reward for better quality work or for treating sicker patients.”
· According to a new report in Health Affairs, Paul Ginsburg and Robert Berenson found that “providers’ growing market power to negotiate higher payment rates from private insurers is the ‘elephant in the room’ that is rarely mentioned.”
· A report from the Robert Wood Johnson Foundation found that hospital consolidation has contributed to rising health care costs. The report stated, “Research suggests that hospital consolidation in the 1990s raised inpatient prices by at least five percent and likely significantly more. Prices increase 40 percent or more when merging hospitals are closely located.”
· According to a brief from the National Institute for Health Care Management, “With only a few exceptions, results consistently demonstrate that hospital consolidations result in higher prices for hospital services. The magnitude of price increase varies by methodology and by the characteristics of the markets under study, ranging from low-end estimates of 5 percent price hikes to increases of more than 50 percent.”
· Recent reports show how much hospital consolidation has increased in recent years, indicating that:
o The vast majority (88 percent) of U.S. Metropolitan Areas have highly concentrated hospital markets.
o Hospitals markets have increased their concentration by 47 percent over 13 years.
Capps paper on AMA data
AHIP recently submitted a report to the DOJ and FTC on the Horizontal Merger Guidelines Review Project that calls into question the AMA data on concentration. The paper, “Federal Health Plan Merger Enforcement is Consistent and Robust,” written by Cory Capps, PhD, of Bates White, LLC is available here: http://www.ftc.gov/os/comments/horizontalmergerguides/545095-00009.pdf. In our cover letter we said the following:
“…the American Medical Association market share and concentration figures (“AMA data”), which have been offered by the AMA for a number of years, are plagued by a number of significant limitations and appear to be unreliable. Most critically, the data are incomplete and omit various competitive alternatives, with the result that the market share figures do not reliably reflect the actual state of competition in such markets. While market share data are only a starting point, the review of any merger, in any industry, depends critically upon the use of accurate data. Simply put, the AMA data are no substitute for the DOJ’s practice of relying upon actual data from actual markets, and the use of these data in advocacy efforts demonstrates the danger of detaching merger analysis from specific, and accurate, market facts.”
“…critics have offered no evidence that lower payments to healthcare providers or lower quality healthcare have resulted from health insurer mergers generally or from any specific health insurer merger. Indeed, the evidence reviewed in the Capps Paper suggests that increased payments to providers of healthcare goods and services account for all or nearly all of the premium increases over the last decade. While general facts do not determine the results of individual merger reviews, this fact may be informative as DOJ and the FTC determine where to focus their enforcement resources.”
What You Need to Know: McCarran-Ferguson Act
Posted by The Campaign on February 03, 2010 at 9:15 AM
National Association of Insurance Commissioners letter (10/21/2009):
“The potential for bid rigging, price fixing and market allocation is of great concern to state insurance regulators and we share your view that such practices are harmful to consumers and cannot be tolerated. However, we want to assure you that these activities are not permitted under the McCarran-Ferguson Act and are not tolerated under state law. Indeed, state insurance regulators actively enforce prohibitions in these areas.”
To read the full letter, click here.
Congressional Budget Office analysis (10/29/09):
“The analysis also takes into account the provisions of section 262 of Division A regarding the application of federal antitrust laws to health insurers. CBO estimates that implementing those provisions would have no significant effects on either the federal budget or the premiums that private insurers charged for health insurance. For an analysis of a similar proposal, see CBO’s cost estimate for H.R. 3596, the Health Insurance Industry Antitrust Enforcement Act of 2009 (October 23, 2009).”
To read the full analysis, click here.
Congressional Research Service analysis (8/31/2009):
“Given the courts’ narrowing definition of the ‘business of insurance,’ they would not be likely, in any event, to find such activities as market allocation, tying, or monopolization protected by McCarran-Ferguson from the application of the antitrust laws.”
American Academy of Actuaries letter (1/21/10):
“These analyses of aggregated data serve several purposes; those purposes align with the original intent of the McCarran-Ferguson Act and assist state regulators charged with overseeing the pricing of insurance coverage and solvency of insurers. A few of these purposes are:
1. To provide credible data upon which to base loss estimates and premium rates.
2. To enhance competition by providing access to industry information to enable existing companies to offer products in new markets or for different types of exposure by reducing the uncertainty associated with determining loss estimates and premium rates.
3. To further support competition by providing data to newly-formed companies or self-insurers looking to begin covering medical professional liability exposure.
4. To guide companies, self-insurers, and regulators in reducing the likelihood of insolvencies, a long-term and recent concern. Through the review of industry data, companies, self-insurers, and regulators are better able to evaluate whether too little is being charged or not enough is being set aside in reserves for a given exposure situation.”
To read the full letter, click here.
AHIP letter to Senator Leahy and Representative Conyers (10/8/09):
“In our view, the two bills under consideration may be based on a misperception of the scope and impact of the McCarran-Ferguson Act on health insurers. The Act does not preclude regulation of insurers, but, instead, recognizes that the states play a central role in conducting oversight of health and other insurers.”
To read the full letter, click here.
AHIP letter to Representative Conyers (10/21/09):
“The narrow nature of the Act, as interpreted by courts, means that the types of anticompetitive activity contemplated by the bills already are subject to federal and state antitrust laws. We believe that health insurers have not been engaging in anticompetitive conduct and that McCarran-Ferguson does not provide a shield for such conduct. Thus, the bills attempt to remedy a problem that does not exist.”
“We ask you to consider our strong concerns that such legal uncertainty could chill or limit newly developing activities that will benefit consumers and doctors (e.g., physician portals now developing to streamline administrative processes and data aggregation efforts that are designed to respond to physician concerns that they not be evaluated only through the lens of an individual health plan’s patient population) and add to the already substantial cost that litigation imposes on the health care system.”
To read the full letter, click here.
Scott Harrington op/ed (WSJ, “Competition and Health Insurance”, 11/6/09):
“Repealing the antitrust exemption for health insurers would not significantly increase competition, and it would not make health-insurance coverage either less expensive or more available. There is no evidence that the exemption has increased health insurers' prices or profits or contributed to higher market concentration.”
“In other words, the insurance industry's antitrust exemption is inconsequential to the health-care reform debate. It just distracts attention from important issues and further demonizes private health insurance.”
To read the full article, click here.
BNA article (“Bills to Repeal McCarran-Ferguson Act for Health, Malpractice Insurers Introduced”, 9/23/09):
“Attorneys who spoke to BNA said, however, there is no evidence that the act has been an impediment to either federal or private efforts to prevent or curtail anti-competitive conduct in these sectors.”
The article also quoted Jack A. Rovner, with The Health Law Consultancy in Chicago: “While the law does not have much impact on the health insurance industry, it makes a good political target,” he said. “This is more about politics than an effort to correct anti-competitive conduct by health insurers because the fact of the matter is that repeal would not make a significant difference with respect to either compliance or enforcement,” Rovner said. “McCarran-Ferguson has never been a valid defense to the price-fixing or other per se antitrust law violations targeted by the legislation, whether pursued by government or private parties,” he added. “While repeal could have a significant impact on the balance of state and federal relations, the proposed legislation will not change a lot in the legal landscape concerning the way health and malpractice insurers are regulated,” he said.
To read the full article, click here.
Business Week article (“Reviving an Old Threat in Health-Insurance Battle”, 10/19/09):
“’There would be quite a bit of confusion and legal action on the state and federal level as regulators try to figure out who's responsible for regulating what,’ says Joseph Paduda, principal of Health Strategy Associates, a managed-care consulting firm in Madison, Conn.”
“Austin Frakt, a health economist and assistant professor at Boston University's School of Public Health, says lawmakers also would have to take into account the other parties that contribute to driving up health-care costs—including doctors, hospitals, and drug companies—which McCarran-Ferguson does not address.”
“Threatening a repeal of McCarran-Ferguson ‘doesn't seem like it has been thoroughly thought through,’ says Frakt. As with every aspect of the proposed reform, the question of whether to regulate insurance at the federal or state level ‘requires a nuanced approach.’”
To read the full article, click here.
Health insurance is one of the most regulated industries in America at both the federal and the state level: http://bit.ly/PJuzm
ICYMI: BRT Believes Senate Bill Jeopardizes Coverage, Competition, and Increases Costs
Posted by The Campaign on November 20, 2009 at 5:30 PM
The Business Roundtable issued a press release today stating they do not support the Senate bill because it does not reduce health care costs.
Here are a few key excerpts:
"Based on our experience and research, the current health care reform proposal being considered by the Senate will not effect the needed changes to measurably improve the American health care system. Specifically, two of the bill’s provisions will increase costs for employers and, in so doing, threaten the coverage of 177 million Americans who obtain insurance through the workplace: the government-run plan and the new taxes on devices, drugs and insurance. The employer costs associated with these items will jeopardize not only millions of workers’ coverage, but also the competitiveness of America’s companies in the global marketplace."
“We are also concerned that the current proposals miss several key opportunities to reduce costs, most notably medical liability reform."
For the full statement, click here.
Fact Check: The Boston Globe -- Jeff Jacoby: Attacks on Health Plans' Profits Misguided and Misleading
Posted by The Campaign on November 02, 2009 at 10:13 AM
Boston Globe’s Jeff Jacoby writes that attacks on health plans' profits are misguided and misleading. Here are some key excerpts:
“For the most recent quarter of 2009, health-insurance plans earned profits of only 3.3 percent, ranking them 86th on the expanded Yahoo! Finance list of US industries. Makers of software applications, by contrast, are pulling in profits of nearly 22 percent.”“For all the impassioned talk about obscene profits and bodies piling up, reports AP’s Calvin Woodward, “health insurance profit margins typically run about 6 percent’’ of revenue, a return “that’s anemic compared with other forms of insurance and a broad array of industries.’’”“On the Fortune 500 list of top industries, health insurance companies ranked 35th in profitability in 2008; their overall profit margin was a mere 2.2 percent. They lagged far behind such industries as pharmaceuticals, which showed a profit margin of 19.3 percent, railroads (12.6 percent), and mining (11.5 percent).”“Among health insurers, the best performer last year was HealthSpring, which showed a profit of 5.4 percent. “That’s a less profitable margin,’’ AP noted, “than was achieved by the makers of Tupperware, Clorox bleach, and Molson and Coors beers.’’”
“…the notion that health insurers “make more money than any other business in America today’’ is preposterous.”
“But the way to increase competition is not by adding a government-run health plan to the 1,300 private firms already providing health insurance. We do have a highly competitive national market for auto and life insurance, after all, and with no public option.”
For the full article, click here.
FACT CHECK: The Truth About McCarran-Ferguson
Posted by The Campaign on October 29, 2009 at 10:00 AM
Recently, the McCarran-Ferguson Act has become the focus of the reform debate. However, there are some misconceptions about the effect repealing the McCarran-Ferguson Act would have on costs and competition. Below are some key facts about this:
The Congressional Budget Office issued a report earlier this week which stated "would have no significant effect on the premiums that private insurers would charge for health insurance." For the full report click here.
Politico reports "CBO: Repealing insurance anti-trust exemption won't affect premiums" For the full article click here.
Bloomberg news reported on this issue late last week. Here are some key highlights from the article:
- " A proposal by the U.S. Congress to limit health insurers’ 64-year-old antitrust exemption won’t increase competition..."
- Robert Laszewski, an Alexandria, Virginia-based consultant to the industry said "Either the people who are proposing this are really naïve about how insurance is regulated, or they are just playing political games with the voters."
- "Repealing the exemption is 'not the silver bullet that I think some proponents are claiming,' said Greaney, who headed the Justice Department’s health-care antitrust unit in the 1980s. 'It certainly is not going to make a big difference in terms of the competitiveness of the markets.'"
- "'I think it’s going to fizzle,' [Laszewski] said of the antitrust repeal. 'They had themselves a couple of good days rattling sabers, but I think now their aides are going to be in their ears, whispering, "Hey, this doesn’t mean a whole lot."'"
ICYMI: Bloomberg Reports That Congress is “‘Shooting blanks’ With Antitrust Threats to Insurers”
Posted by The Campaign on October 25, 2009 at 8:43 PM
A Bloomberg article reports on the ineffectiveness of repealing McCarran-Ferguson. Read some key excerpts below:“Either the people who are proposing this are really naïve about how insurance is regulated, or they are just playing political games with the voters.”“Repealing the exemption is “not the silver bullet that I think some proponents are claiming,” said Greaney, who headed the Justice Department’s health-care antitrust unit in the 1980s. “It certainly is not going to make a big difference in terms of the competitiveness of the markets.””
For the full article, click here.
ICYMI: AP Reports on What Experts Have to Say About Repealing McCarran-Ferguson
Posted by The Campaign on October 23, 2009 at 7:18 AM
AP business writer, Matthew Perrone, reports on what healthcare industry analysts and legal scholars say will be the outcome of repealing Mccarran-Ferguson. Take a look at some key excerpts:
"...lawmakers are seeking to stir up competition by stripping health insurers of their protection from certain federal antitrust laws, although experts shrug off the effort as largely symbolic."
"Some observers suggest the move by Democrats is mainly a reprisal against the insurance industry group, America's Health Insurance Plans, which last week launched an unexpected attack against the health care legislation drafted by the Senate Finance Committee, saying it would drive up premiums for consumers."
"But industry analysts say courts have long limited the scope of the exemption to allow federal regulators to intervene in instances where competition could be jeopardized. They note the law has never stopped regulators at the Department of Justice and the Federal Trade Commission from intervening in a merger or acquisition."
"While the threat to repeal the exemption makes for good headlines, we can't really see how it alters the business for the established publicly traded players,’ wrote JPMorgan analyst John Rex in a note to investors."
For the full article, click here.
FACT CHECK: Competition and Choice
Posted by The Campaign on September 09, 2009 at 5:51 PM
There are eight or more insurers in each of the top 40 metropolitan areas plus additional independent third party administrators (TPAs) all competing for local business.
Even that underestimates the choices that are available; each of the insurers may offer competing HMOs, PPOs, POS plans, HSAs, and indemnity options, both fully insured and self-insured.
The average provider contracts with a dozen or more health plans in the area.
