Today’s news that HP and Tufts will merge seems to be getting a so so response. However it is notable in a few ways. It belies the concept of “competition” since it is now clear that it is market share not a better product that is paramount. BCSBS with the highest market share also has the highest premiums. It also has negotiated the highest rates based on brand rather than equivalent service. This merger will only exacerbate this problem.
Remember HP is the template of Charlie Baker’s thinking and sorry to say, even though he is a Democrat, James Roosevelt has also bought into the template that it is doctors and patients that are responsible for higher costs rather than the insurers themselves.
We will have to see how this plays out. Should the public buy that this fusion is to their benefit or are we the victim of another shell game?
I understand the concern about competitiveness in the insurance market. But do keep in mind that Partners Health Care (MGH & the Brigham: hospitals and docs!) has vast market power, which they exercised in 2000 to force Tufts to up its payment rates. If you don’t believe me, ask MGH itself!
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p>Uh, yeah.
The negotiation process is an insurance company invention based on getting star powered hospitals in exclusive contracts. So the price change is at the top and sets uneven and out of sight premiums.
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p>The working stiff doctors and hospital employees are not part of this behind closed doors back and forth. The cost of medical services(what patients use day to day) has not increased over the years in any significant amount that justifies the bloated payments certain hospitals get.
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p>However I emphasize that at the bottom the worker bees are not really privy to this process. The deed is done between insurers and professionalized negotiators for the big institutions.
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p>This unevenness results in complicated bureaucracy to support it as well as overloaded contracting teams. With separate pricing for the same services this is a billing and accounts receivable department nightmare raising costs again. Also on balance this whole deal produces nothing that improves our health.
that indeed there has been major conflict between insurers and providers over costs. And the providers won, big time.
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p>If the merger provides the insurer more negotiating power for lower prices, I’d suggest that in and of itself, that’s a good thing, if the savings are passed on to the purchasers and then into paychecks. If if if.
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p>The question is whether the loss of competition among insurers cancels out that possible benefit. I don’t know the answer to that.
What I’m trying to point out here is how these negotiations are structured. Instead of system wide contracting it is done provider by provider or institution by institution. There are also no protections to put the brakes on how much is allowed. Until there is a global approach with all parties sitting down to fashion a similar outlay for each, no progress on costs will be made.
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p>The influence of “branding” must be removed if the exact same service and quality is offered.
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p>Expense is also derived from billing, marketing, and negotiating. It is also enhanced by insurers promoting themselves as care agents instead of insurance agents.
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p>The items in the last paragraph with disappear from the balance sheet if all players settled for the same fees.
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p>A strong negotiating stance in the public’s favor is great but it has to be coupled with real reductions in the cost of doing this business. Otherwise nothing changes. Other states where some insurers have upwards of 80+% of the health insurance business have not controlled their premium increases e.g. Wellpoint.
…negotiations is for one side of the back-and-forth to get bigger.
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p>The merger request I think is a natural result of the forces at play here. Insurance companies don’t compete on service – they compete on their risk pools. By taking out pre-existing conditions, we’ve impacted their ability to compete with each-other. Knowing that there are market forces on the provider side driving up costs for them, their turning to other means of efficiency – normally they’d manipulate their risk pools more, but increasing the overall size of their pools by merging them.
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p>It also so happens that this will additionally put them in better negotiating position as well.
Massachusetts does not allow non profits to reject subscribers with pre existing conditions for years, even predating our current mandated insurance.
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p>The “natural forces” left to the market place will create monopolies on both sides of the equation–insurers and institutional providers. Others not part of this power play will pay the piper to make up short falls created by this distorted negotiation process. The little guy will again be screwed and also make enabling of the National Health Law more perilous.
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p>At present the greatest problem is the exemption from anti trust laws that health insurance companies enjoy. This is suppose to occur when any insurer garners 40% or more of subscribers in a given region. To date this does not apply to health insurers. Obviously now this situation will expand. This has some unintended consequences.
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p>Some doctors will refuse to take certain insurances based on contracting regs and payment. Long term relationships with patients will be further disrupted when this happens. The 4 largest insurers make up 85% of the commercial insurance market. That total market covers about 70% of all with Medicare, Medicaid, self paying, and Veteran Care making up the rest.
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p>Ironically, even though the “market share” of commercial insurer may be hugh this is not represented in many practice patient bases. Why? Because Medicare and Medicaid make up a larger portion of patient visits(they have more health problems). They generate 2 to 3 times the visits of under 65 working folks.
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p>The real fight here by insurers is for the healthier population. If the aim was to just increase their patient rolls this would be a positive step. However they will continue to market to those who have minimal contact with the health care system. The portion of the population that has the greatest needs will be adversely impacted even more. This will be allowed unless there is some tighter regulations.
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p>The consolidation of these two, Harvard Pilgrim(a union of two prior insurers themselves–Harvard Community Health Plan and Pilgrim Health Plan) and Tufts will only more centralize the same unworthy business plan. The poor and the elderly will be pushed out of the picture. Does this really enrich our society? Is it difficult to visualize that we all one day will be older or maybe have some hard luck or it could happen to a loved family member. This merger is not the answer.
Have we learned nothing from the anti-competitive consolidation in the financial industry? Any time industries are allowed to consolidate like this, only bad things happen for consumers. There is a lessening of choice, no competition on prices, only more rules designed to help the bottom line of the business. OTOH, things being what they are, if the two businesses decided to hook up, they will get a rubber stamp approval, and we will all suffer for it.
Like MGH and the Brigham? Hmm. Again, we’re really looking at cartel-vs.-cartel here.
Smacks of anti-competitive trust.