En­forc­ing re­form

It’s time for fed­eral au­thor­i­ties to bring an­titrust scru­tiny to in­sur­ers

Modern Healthcare - - Opinions Commentary - David Balto David Balto is a se­nior fel­low at the Cen­ter for Amer­i­can Progress and for­mer pol­icy di­rec­tor of the Fed­eral Trade Com­mis­sion’s Bureau of Com­pe­ti­tion.

We have reached a crit­i­cal junc­ture in the evo­lu­tion of the health in­surance mar­ket­place: health­care re­form will soon be im­ple­mented, and a num­ber of pro­vi­sions seek to pro­mote com­pe­ti­tion be­tween health in­sur­ers.

The Fed­eral Trade Com­mis­sion and the Jus­tice Depart­ment’s An­titrust Di­vi­sion each play cen­tral roles in pro­tect­ing com­pe­ti­tion and, in turn, pro­tect­ing con­sumers. For the new re­forms to be ef­fec­tive in ex­pand­ing ac­cess to af­ford­able, high-qual­ity health in­surance prod­ucts, these com­pe­ti­tion reg­u­la­tors must meet the chal­lenge of polic­ing health in­sur­ers in the post-re­form era.

If there is one undis­puted fact from the health­care de­bate, it is that health in­surance mar­kets are bro­ken. More than 47 mil­lion Amer­i­cans are unin­sured, and ac­cord­ing to Con­sumer Re­ports, as many as 70 mil­lion more have in­surance that doesn’t re­ally pro­tect them. A study re­leased last May by Health­care for Amer­ica Now de­tailed just how con­cen­trated health in­surance mar­kets are: at that time, 94% of statewide health in­surance mar­kets were con­sid­ered “highly con­cen­trated” un­der Jus­tice Depart­ment guide­lines, and in most states only one or two in­sur­ers dom­i­nate the mar­ket. This con­cen­tra­tion has been ac­com­pa­nied by ris­ing premi­ums and health in­surer prof­its.

The Bush ad­min­is­tra­tion failed to prop­erly set en­force­ment pri­or­i­ties, lead­ing to an en­vi­ron­ment where health in­sur­ers thrived in a com­pe­ti­tion-free zone. Dur­ing the pre­vi­ous ad­min­is­tra­tion, the FTC brought 31 en­force­ment cases against providers, fre­quently small groups of doc­tors. These cases were not based on ev­i­dence that physi­cian costs were a sig­nif­i­cant force in in­creas­ing health­care ex­pen­di­tures. More­over, none of these cases was fol­lowed by a pri­vate suit seek­ing dam­ages for the al­leged il­le­gal con­duct.

While in­ex­pli­ca­bly fo­cus­ing ex­clu­sively on health­care providers, the FTC and the Jus­tice Depart­ment let health in­sur­ers run amok, in­creas­ing mar­ket share while fla­grantly vi­o­lat­ing con­sumer pro­tec­tions. The FTC and the Jus­tice Depart­ment took no con­sumer pro­tec­tion ac­tions against health in­sur­ers, and the Jus­tice Depart­ment took no en­force­ment ac­tions against an­ti­com­pet­i­tive prac­tices by health in­sur­ers. State in­surance reg­u­la­tors failed to con­sis­tently or ef­fec­tively po­lice health in­sur­ers. Mean­while, there were more than 400 health in­surance merg­ers in the past decade, with only two mod­est con­sent de­crees.

The new health­care re­form leg­is­la­tion seeks to

Fed­eral law en­force­ment should ad­dress the chronic com­pe­ti­tion and con­sumer prob­lems in health in­surance.

be­gin to re­store heath in­surance com­pe­ti­tion in a num­ber of ways. For ex­am­ple, it cre­ates state health in­surance ex­changes, which would serve as cen­tral mar­ket­places for con­sumers seek­ing in­di­vid­ual pri­vate in­surance plans. The mar­ket for these in­di­vid­ual plans to­day is any­thing but con­sumer-friendly, and there are egre­gious ex­am­ples of rescis­sion, cov­er­age de­nials and “junk” plans. The ex­changes es­tab­lished by health­care re­form are in­tended to pro­vide some uni­for­mity to the process of com­par­ing in­di­vid­ual health in­surance op­tions, in­sert­ing di­rect com­pe­ti­tion where un­cer­tainty and de­cep­tion cur­rently reign.

The FTC and the Jus­tice Depart­ment should sup­port re­form by ad­dress­ing the chronic com­pe­ti­tion and con­sumer pro­tec­tion prob­lems in health in­surance mar­kets. I pro­pose that the FTC and the Jus­tice Depart­ment:

Mar­shal com­pe­ti­tion en­force­ment re­sources to fo­cus on anti-com­pet­i­tive and de­cep­tive con­duct by in­sur­ers. Health in­surance mar­kets are ex­tremely con­cen­trated, and the com­plex­ity of in­surance prod­ucts and the opaque na­ture of their prac­tices pro­vide a fer­tile medium for an­ti­com­pet­i­tive and de­cep­tive con­duct. The govern­ment’s con­sid­er­able health­care en­force­ment re­sources should be re­de­ployed to fo­cus to a far greater ex­tent on health in­surance. The FTC in par­tic­u­lar should scru­ti­nize anti-com­pet­i­tive con­duct and use its pow­ers un­der Sec­tion 5 of the FTC Act. Re­peal­ing the McCar­ran-Fer­gu­son Act, which ex­empts in­sur­ers from fed­eral an­titrust law, would elim­i­nate any po­ten­tial road­blocks to en­force­ment here.

Cre­ate a vig­or­ous health in­surance con­sumer pro­tec­tion en­force­ment pro­gram at the FTC. The FTC’s health­care con­sumer pro­tec­tion en­force­ment cur­rently fo­cuses on mar­keters of sham and de­cep­tive prod­ucts. The FTC should ad­just its health­care en­force­ment to scru­ti­nize health in­sur­ers and ad­dress egre­gious and fraud­u­lent prac­tices.

Strengthen health in­surance merger en­force­ment. There was mas­sive con­sol­i­da­tion in the health in­surance mar­ket­place over the past eight years. The Jus­tice Depart­ment should scru­ti­nize any fu­ture merg­ers and se­ri­ously con­sider their po­ten­tial ef­fects on con­sumers. More­over, the agen­cies should con­duct a ret­ro­spec­tive study of health in­surer merg­ers to clar­ify the le­gal stan­dards and eco­nomic an­a­lyt­i­cal tools for ad­dress­ing health in­surance merg­ers.

Re­vise the Jus­tice Depart­ment and FTC’s joint health­care guide­lines to bet­ter re­flect the cur­rent health­care mar­ket and the proven value of col­lab­o­ra­tion be­tween providers. The guide­lines were is­sued in 1996 and are out of date. The de­liv­ery of health­care has changed sub­stan­tially over the past 13 years, and by iden­ti­fy­ing ar­eas of col­lab­o­ra­tion that are in­no­va­tive and ef­fi­cient, the FTC and the Jus­tice Depart­ment may be able to free up re­sources now spent en­forc­ing against health­care providers en­gaged in col­lab­o­ra­tive ef­forts.

The FTC and the Jus­tice Depart­ment have, for too long, avoided deal­ing head-on with com­pe­ti­tion and con­sumer pro­tec­tion vi­o­la­tions in health in­surance mar­kets. Now that health­care re­form is a re­al­ity, they must meet the chal­lenge of en­sur­ing that con­sumers get the full ben­e­fit of a ro­bustly com­pet­i­tive mar­ket­place for in­surance.

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