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The Health Insurance Monopoly

by DON MONKERUD

Like pathetic knights of another era jousting at windmills, industry shrills attack health care reform, claiming it "tramples individual liberty" and stifles "free enterprise."

Far from protecting individual liberty or promoting free enterprise, these forces uphold monopoly control of health care insurance that has a stranglehold on American consumers. And they pay huge sums to control the debate and twist legislation to their advantage.

Since 1998, over 400 mergers left two conglomerates in control of the huge health care insurance industry. Mergers allowed insurers to raise prices, buy influence in Congress, and redistribute cost savings to shareholders. Consolidation increased rapidly. Between 2004 and 2005, 28 health care mergers, valued at $53 billion, outpaced the number of health care mergers in the previous eight years combined.

Low interest rates, leverage and lax anti-trust enforcement by the Bush Administration allowed conglomerates to take control of the health insurance in the U.S. A 2009 report from Fortune Magazine reveals that the revenue of the top two companies account for $142 billion or 36 percent of the health care insurance market, while the top four gross $202 billion, almost three quarters of all health insurance.

"During the Bush administration, there were no enforcement actions against health insurers’ anticompetitive, deceptive or fraudulent conduct," David Balto, senior fellow, Center for American Progress, told the Senate Committee on Commerce, Science and Transportation in July 2009. "There was tremendous consolidation in the market, and the Justice Department simply required minor restructuring of two mergers. There were no cases against anticompetitive conduct by health insurers."

Health insurance monopolies do business under pseudonyms to hide their identities and project a false impression of competition in the industry. The largest, UnitedHealth Group, reported $81 billion in revenue in 2008 and sold products under such names as OptumHealth, Ovations and AmeriChoice. WellPoint, the second largest, has revenues of $61 billion and insures 35 million people under Unicare and Blue Cross/Blue Shield. Concentration is even greater on a state-by-state basis.

A 2006 study by the AMA found that health insurance is "highly concentrated" in 94 percent of the states, and in a majority of the nation’s largest metropolitan areas a single insurer controlled more than half the business. A 2007 study by Health Care for America Now found that in 38 states, the top two insurers control 57 percent or more of the market, and in 15 states one insurer controlled 60 percent or more of the market.

Facing the monopoly power of UnitedHealth Group and Wellpoint, smaller firms cannot compete: Aetna ranks third with $31 billion in revenue, and Humana is fourth with $29 billion. Of the 14 health care insurers, the smallest eight have yearly revenue of less than $12 billion.

Such concentration stands in stark contrast to a "free enterprise" system where companies compete to lower costs and provide consumer choices. Instead, monopoly control raises prices unilaterally and controls every aspect of clients’ health care. No wonder insurance premiums increased an average of 87 percent in the past six years, according to FamiliesUSA.

Economists point out that most wage increases went to pay for health insurance from 2000 to 2009. For example: In New York, the cost of health insurance increased 93 percent, while wages increased 14 percent; in California, health insurance increased 109 percent, while wages increased 26 percent; and in Texas, health insurance rose 80 percent, while wages rose 11 percent. Insurers also have "monopsony" power to dictate prices and coverage terms to hospitals and doctors, with profits redistributed to shareholders. Profits increased apace.

According to SEC filings, the major health insurers increased their profits over 400 percent from 2000 to 2008. Overall, profits rose from $2.4 billion in 2000 to $13 billion in 2007. CEOs were paid accordingly; their pay reaching 468 times that of the average American worker, with money left over to lobby against reforms.

According to the National Institute on Money in State Politics, the health care industry paid almost $400 million to politicans in state governments in the past six years. The Center for Responsible Politics discovered the industry spent over $1 billion in the past two years to oppose real reform. As the debate progressed, important consumer protection provisions were whittled away.

"Although the overwhelming majority of the American people support it, there’s no public option, no end of the anti-trust exemption for the health insurance industry, no option for people over 55 to buy into Medicare, no ability of the government to negotiate drug prices or import cheaper drugs from Canada, and no real regulation of health insurance premiums," said Zack Kaldveer, spokesman for the Consumer Federation of California. "Yet, Congress is mandating everyone to purchase an overpriced product from a corrupt system. If premiums continue to rise, we’ll be stuck wasting money on an unsustainable health care system."

The insurance monopoly is pouring millions of dollars into creating misleading catchwords, carefully chosen to guide our opinions. Reforms are needed to protect consumers from a vast monopoly, slowly draining our paychecks into for-profit conglomerates. Without strict controls over these monopolies, we will be stuck with the same old predatory system.

DON MONKERUD is an California-based writer who follows cultural, social and political issues. He can be reached at monkerud@cruzio.com.

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