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EDITORIAL: Making health insurance less competitive
The House of Representatives is set to vote next week on a bill to strip health insurance companies of their limited antitrust exemption. This would undermine competitiveness in the market.
The legislative push against the insurance industry is a predictable result of disinformation put out by the Obama administration. For months, President Obama has conjured up a picture of health insurance companies colluding to raise insurance premiums. These purportedly evil companies supposedly are able to collude by the antitrust exemption. The problem with this dark worldview is that the exemption only allows insurance companies to share mortality and care data. This information allows insurance companies to better know the risks that different categories of patients face and hence properly set insurance premiums.
Information sharing is particularly important for small insurance companies because they typically cannot build up comprehensive databases themselves. In other words, this particular antitrust exemption does not discourage competition; it increases competition by making it possible for more companies to be in the market.
Numbers touted cavalierly by Democrats to show that the industry is concentrated leave out more than half the people who have insurance - those who are insured through employers who act as their own insurance companies, so-called "self-funded" or "self-insured" companies. Some employees might not even realize when they are insured by one of the mainstream insurance companies and when an insurance company is hired by their employer to handle the paperwork.
In his address to Congress in September, Mr. Obama claimed, "In 34 states, 75 percent of the insurance market is controlled by five or fewer companies." As Fox News reported, self-insured firms cover 57 percent of people insured in those states, and thus the correct total market share for the largest five firms is 32 percent, not 75 percent. The 57 percent of people covered by their own employers represent many thousands of companies. That sounds like a very competitive market.
There is room to increase competition in the insurance industry, and there are government regulations - such as red tape that prevents competition across state lines - that ought to be abolished. But there still is substantial competition in today's insurance market. Abolishing the antitrust exemption makes it harder for smaller firms to compete, to the advantage of larger companies. That's change in the wrong direction.
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