FREE SPEECH ZONE | Why the public option is needed in Minnesota

Those who oppose including a public option in health care reform do so for a variety of reasons and motives. At the most obvious end, is the Republicans who simply wish to kill health care altogether, thus the public option becomes a leverage point for their opposition.  At the other end are those (mostly Democrats) who are frightened at the prospect of being labeled some sort of left wing liberals beholden to government intervention, when the next election rolls around this November.

In regard to the Republicans, and others stonewalling reform, their suggestions are pretty clear, and disingenuous at best.  Often they offer spurious ideas which they know are ineffective or unacceptable – simple solutions like tort reform, and “letting insurance companies sell across state lines”.  Some Democrats have suggested the use of “exchanges or co-ops” in lieu of a public option.  In either case, the absence of a public option will be harmful to Minnesota consumers. Here’s why.

To begin with, the market share of health insurance in our state is incredibly controlled almost exclusively between two companies now. BlueCross BlueShield MN has 50% of the market; and Medica 26% for an astounding 76% total state market share.  This condition raises both questions and concerns.  Starting with the concerns, it would be very difficult to have new companies come into Minnesota to compete with two strong entrenched state insurance giants.  Yes, they could do so with price, to lure customers away from BCBS or Medica, but that is unlikely based on past performances within the insurance industry. What would be more strategic is to go after those customers who are not currently insured by the two entrenched companies – but who is that market? Almost certainly it is customers the two big guys have either shed, do not want, or are uninsurable for one reason or another. The bottom line, I do not see competition aggressively coming in to challenge BCBS or Medica.

To further support this view, on a national level this same lack of competition exists, also making the Republican claim of just “letting insurers sell across state lines” a myth.  A recent study by the AMA reported the following:

“The 2008 update of Competition in Health Insurance: A Comprehensive Study of U.S. Markets presents new data on the degree of competition in different regions of the country. It is intended to help identify areas where consolidation among health insurers may have harmful impacts on consumers, providers of care and the economy. Market shares and concentration (HHI) measures are presented for 314 metropolitan areas and 42 states. This study finds the vast majority of markets are highly concentrated and are dominated by one or two health insurers. These findings, coupled with higher insurance premiums, higher profits, lower scope of benefits and high barriers to entry, leads to the conclusion that health insurers are exercising market power in many parts of the country.” (Emphasis mine).

As to the reasons why we cannot allow the private sector to mitigate the competition issue, some are clear, and some conjecture.  The clear ones are that there are now only 5 major health insurers in the national market, and they control a massive share of the “better” insured prospects. Even then, consolidation is continuing on, with negative effects. The recent California rate hikes are a good example. WellPoint (one of the 5 majors) bought out Anthem Blue Cross of California.  WellPoint and Kaiser Permanente now control 58% share of the huge California market, and obviously felt they could raise rates with impunity.  Only a loud outrage has put that on hold.   But the American public should not rely on these insurers competing much among themselves, and certainly not in Minnesota.  As far a conjecture goes, one has to ask themselves why United Health – another of the big 5 based right here in our home state of Minnesota (Minnetonka) – does not even attempt to compete on its own turf? That has the faint odor of…well “conjecture”.  Meanwhile, the private sector has had decades of operation to fine tune their competition, and look where it has lead us.

Some in both houses of Congress have suggested the creation of either “exchanges” or co-ops as an alternative to a public option. While at least a level above simply letting companies “sell across state lines”, it is filled with complexity and unknowns. Are they to be local, regional, state or national? How will they be run, and by whom? What will the administrative costs be?  Will everyone be eligible? All these questions would affect the viability of such a plan. The Commonwealth Fund is a private foundation that aims to promote a high performing health care system that achieves better access, improved quality, and greater efficiency, particularly for society’s most vulnerable, including low-income people, the uninsured, minority Americans, young children, and elderly adults. This is their take on the exchange issue:

“Whether the exchange will effectively perform these functions, however, depends entirely on the institutions established to administer it; the functions, responsibilities, and authority it is afforded; it’s regulatory environment; and the structure of the markets in which it operates. We have, in fact, had a lot of experience with exchanges-also called purchasing cooperatives or health alliances-and much of that experience has been discouraging. In the past, exchanges have often had a difficult time attracting enough members or insurers to function efficiently, and have become targets of adverse selection. They have rarely been able to achieve their promise of significantly reducing the cost of insurance premiums or increasing access to health care. With this in mind, Congress needs to be careful in its policy choices in order to optimize the chance of success.” (Again, emphasis mine).

In short, given the market share conditions in our state; the urgent need for true competition; the lack of Republican ideas to bring reform to Minnesota and the nation; the unknowns about alternative plans such as exchanges and co-ops…it would appear that the best, easiest, most effective, most cost efficient and acceptable plan to improve health care in our state and nation; and assure true competition within the health insurance field, is the inclusion of a public option in the health care reform now moving through Congress. Hopefully, that is what we will have in the near future for Minnesota.