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Life Health > Health Insurance > Life Insurance Strategies

Blues: Purchasing Pools May Not Help

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The Blue Cross and Blue Shield Association says an actuarial analysis it commissioned suggests that forming new health insurance purchasing cooperatives would not do much to lower costs for individuals or small groups.

Past efforts to create “connectors,” “exchanges” and other types of purchasing cooperatives have driven up costs, by limiting competition, and, in some cases, by encouraging adverse selection by permitting individual workers at small employers to choose their own health plans, according to the BCBSA, Chicago.

The BCBSA is supporting its argument by releasing a report by Karen Bender and Beth Fritchen of Oliver Wyman Actuarial Consulting Inc., New York.

In the report, developed at the request by the BCBSA, the consultants conclude that past purchasing pool efforts have increased premiums as much as 6%.

In addition to encouraging adverse selection, the pools often drive up administrative costs rather than creating economies of scale, and they do not increase the amount of risk pooling, the consultants contend.

“Pooling of risk actually occurs at the level of the health plan, not the purchasing arrangement,” BCBSA officials write in a summary of the consultants report. “Encouraging small employers to buy coverage through a purchasing arrangement will not create larger pools.”


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