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Life Health > Health Insurance > Health Insurance

On the Third Hand: Competition

By Allison Bell

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Companies have been acquiring each other and eliminating venerable old brands since whenever it was that companies came into existence.

In 1899, for example, Western Underwriter, one of the ancestors of the publications that now run the LifeHealthPro news service, bought another 18-year-old insurance news publication, the Black and White, and consolidated it into its own operation.

Fortis acquired Time Insurance Company, John Alden Life Insurance Company, and other well-known companies of the past many years ago. Fortis yanked its brand name off of what it built when it spun its U.S. insurance operations off to form Assurant Inc. (NYSE:AIZ).

So, OK: The news that Assurant is looking for a buyer for Assurant Health and Assurant Employee Benefits, and, apparently, might simply close Assurant Health down if it can’t find a buyer, is certainly not a catastrophe. It’s not within light years of being in the same league as the news about the riots in Baltimore. It’s not in the same universe as the news about the earthquake in Nepal. 

But it’s still a little sad. Time Insurance Company helped create the modern U.S. group health insurance market, and now the Patient Protection and Affordable Care Act (PPACA) seems to have re-arranged the health insurance market in a way that shuts the remnants of Time Insurance Company out.

What’s more troubling is hearing rating analysts, securities analysts and other health market observers making statements along these lines: The PPACA public exchange system startup problems are not really any big deal, because the health insurance giants are diverse enough and have pockets deep enough to handle the hiccups; the hiccups are only a serious obstacle for smaller insurers, and newer insurers.

When members of Congress were debating the bills that became PPACA, many claimed that one of their concerns was increasing the level of competition in the private health insurance market. The whole point of going to the trouble and expense of setting up the exchange system was to promote competition.

See also: Details Emerge On New Health Reform Plans

On the one hand, it’s possible that consumers would benefit from more real competition if they were served by a smaller number of bigger, better, more powerful health-care price bargainers. Health care is a big, complicated business, and maybe the grim truth is that a company has to have 20 million major medical plan enrollees to stay in that game.

On the other hand, one of the things I notice as a consumer and reporter is that smaller organizations are often more honest and more transparent, and less tightly connected with regulators. Up till now, for example, executives at the bigger publicly traded health insurers, the health insurers that presumably worked with the U.S. Department of Health and Human Services (HHS) and the state-based exchanges to set up the exchange system, have been noticeably diplomatic about any exchange system problems.

Assurant executives have been a little more blunt. They have complained, for example, about matters such as the government’s last-minute changes in insurance market rules.

In the long run, it seems as if one advantage of keeping smaller players in the insurance game is preserving a vibrant market in ideas about how to improve the game.

On the third hand, maybe the reality is that the unfortunate problems exchanges have had with connecting with producers, and the effects of regulatory uncertainty on the smaller insurers, are completely intentional.

See also: How the PPACA exchange program still infuriates agents

Maybe health insurance policymakers’ real goal is to reduce the number of insurers as much as possible, and to reduce the number of independent, or semi-independent observers, in a position to understand what’s going on as much as possible.

Maybe it will be much easier to pretend to offer higher quality, more comprehensive coverage at a lower price if no pesky Assurant executives or brokers are close enough to the sausage factory to tell us what the sausage really looks like…

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