Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Health Insurance > Health Insurance


Your article was successfully shared with the contacts you provided.

A blogger here wrote a column that I found to be quite disturbing.

It shows some people still work under the assumption that a market with only a few competitors is a bad thing.

Some legislators and Congress critters look at states where Blue Cross is the dominant player and state categorically that this is bad for consumers. In their small minds, market domination by only one, or a few companies, is prima facie evidence that the government need to manipulate the market in order to introduce new players which will in turn drive down prices.

It never occurs to them that Blue Cross (or whoever) is dominant because they have lower rates and/or better value.

Or one might argue that lower rates (or better value) led to market domination.

Regardless, in a free market in which prices are not manipulated by government intervention, consumers will decide who offers the best value which usually means the lowest price.

If one or more carriers dominate a market based on price it will be virtually impossible for a new carrier to come in and make a dent in market share unless the dominant carrier makes a conscious decision (through pricing) to allow new players to usurp their market share.

Competition is a good thing, but unless you put on your tin foil hat and believe there is collusion among the players to “fix” prices it is ultimately the consumer, not the carrier, that decides the competitive base.

Most consumers do not operate in a vacuum, especially when it comes to insurance products and the internet. Almost anyone can go online, conduct a quick search (“Google it”) and quickly come up with a range of prices and plans. Since most consider insurance to be a commodity (and in some cases that is the case) and the only point of differentiation is price, it is not hard for the online shopper to pick out the lowest price plan and complete their purchase . . . all without the government doing a thing to stimulate competition.

With the discussion focused on health insurance, some lawmakers decided the way to effect lower prices is to allow consumers to buy coverage across state lines. In spite of this foolish idea (or perhaps because of it) the Georgia legislature approved a bill that allows health insurance carriers to file in Georgia for approval to sell their products which are currently offered in other states.

Within a few months of becoming law the author of the bill expressed shock that to date not a single carrier had applied to sell their “foreign made” product in Georgia.

Obviously carriers are much smarter than lawmakers, at least smarter than the ones we have in Georgia.

Competition is driven and determined by the free market and consumers in spite of any governmental influence, and nothing more.

If some people believe government intervention is good for spurring competition, they should consider the health insurance market in places like New York, Maine and Vermont where guaranteed issue and/or community rating have driven away all but one or two carriers offering individual health insurance and consumers have some of the highest rates in the country.

If you want to view the future of health insurance competition under Obamacare, you don’t have to travel too far, just to the land of the Big Apple, L.L. Bean or Ben and Jerry’s.

See also:


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.