David Hoppe

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:: WellPoint’s lock on Indiana

We need competition

By David Hoppe

Competition is the watchword of American capitalism. Every school kid is taught that competition inspires higher quality and greater efficiency in our products and services for the best possible price. That’s because competition keeps businesses on their toes. If a business becomes sloppy or over-priced, they risk losing to a new competitor who’s able to do a comparable job for a better price.

But a funny thing happened to this idea of competition. Some businesses, especially big ones, began to see competition not as a necessary part of the market place – something inspiring them to do better – but as a challenge to overcome. Business executives began saying their goal was to “own” their market. In other words, not just be better than their competitors, but to try and eliminate them.

It’s this approach to competition that’s created the degrading mess we call health care in this country.

Indiana is a case in point. Two weeks ago, Central Indiana Jobs for Justice, in cooperation with Health Care for America Now, released a report that shows the extent to which competition has been all but driven out of our state’s healthcare industry.

The report, “Indiana Health-Plan Premiums Soar As Insurers Face Less Competition,” shows that just two insurers, WellPoint, Inc. and M*Plan have created a near-monopoly in this state, controlling 75 percent of the market. WellPoint is especially dominant, with a 60 percent share. In Indianapolis, WellPoint’s share is even larger – 68 percent.

To put these numbers in perspective, the U.S. Justice Department deems a market “highly concentrated” if one company holds more than a 42 percent market share. A company with this kind of clout, the report points out, can raise premiums and reduce the quality of its services without fear of losing business.

This kind of market domination has real consequences for the economic well-being of Hoosiers. Health insurance premiums for Indiana families increased 83 percent from 2000 to 2007. During that time, the average annual combined premium for employers and employees rose from $6,628 to $12,153. The average employer’s portion of annual premiums rose 75 percent; the average worker’s share went up 116 percent. Insurance premiums for working families in this state rose 7.3 times faster than median earnings.

According to the report, “Health insurers play a unique role as both sellers of insurance and buyers of health care services. These companies use their power as buyers against the smaller medical providers while cooperating with larger providers to increase profits for both.”

At the same that Indiana Jobs for Justice was releasing this information, WellPoint was holding its annual shareholders meeting in Indianapolis. WellPoint reported that it made $2.5 billion in profits in 2008. It also spent $4.33 million on federal lobbying. The Indianapolis Star (which missed the release of the Indiana Jobs for Justice report) quoted WellPoint CEO Angela Braly: “It’s the private market that drives innovation and payment for value in the marketplace.”

WellPoint said it supports expanding insurance coverage to the more than 45 million uninsured in this country and that it would cease denying individual coverage to people with pre-existing conditions. People, that is, who really need insurance.

Nothing, however, was reported about what WellPoint might do about the high number of insured people in this country who have been bankrupted by illnesses that forced them to lose their jobs (and so their coverage) or because of gaps in their policies that left them exposed to unaffordable medical expenses. That these millions of people thought they were paying for services and yet were left in the lurch when they needed help the most…well, where’s the innovation and payment for value in that?

The Jobs for Justice report makes one thing clear: Real health care innovation means making private insurers like WellPoint compete for our business. While it would be nice to think that a corporate behemoth like WellPoint might willingly change the nature of the way it does things, there is no reason to expect this. There is no business model for voluntarily walking away from what amounts to a monopoly.

That’s why we need a public health care alternative. Those who claim a government supported program will be too bureaucratic or noncompetitive have only to look at the monopolistic corporate bureaucracy we have now. Indeed, the real fear for corporate insurers like WellPoint is that a government program that takes the side of consumers rather than the largest health care providers will force them to become leaner and more efficient themselves.

Corporations like WellPoint need to realize that they exist to serve us, not the other way around. Whether we choose their products or not should be based on their ability to deliver quality and efficiency at the best possible price.
That’s called competition.