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Mon June 10, 2013
New Hampshire's Health Exchange Monopoly
It wasn’t exactly a victory lap, but the president was in California last week praising an early success of the Affordable Care Act.
Speaking in San Jose on Friday, Obama touted the California health insurance exchange--one of the new online marketplaces where individuals and small business employers can shop for coverage and apply for subsidies starting October 1.
California's exchange will have 13 companies competing for business and rates far below what experts predicted.
"Now, none of this is a surprise," said Obama. "This the way the law was designed to work, but since everybody been saying how it's not gonna happen, I think it is important to us to recognize and acknowledge this is working the way it is supposed to."
The news in California may be good, but the picture is very different in some states. In Rhode Island, there will be only three insurance companies participating.
Vermont, just two.
And in New Hampshire…Granite Staters will have one, just one, company to buy from.
"Listen, when you have states that have very limited numbers of carriers dominating the market, this is not a significant change," says Linda Blumberg, Senior Fellow at the Urban Institute.
She says states across the country deal with this issue today, due to high upfront costs keeping new players on the sidelines, especially if there’s an entrenched power.
That’s the case in New Hampshire, where Anthem Blue Cross controls the individual insurance market. It sells more than 80% of the plans here.
When the exchange opens, it will get all that business too. In effect, a monopoly.
But the President of Anthem, Lisa Guertin, says the company won’t be able to take advantage of its situation.
"We have been working on designing our benefits and our products and our plans for a long time. Long before we learned that there is unlikely going to be competition, at least in year 1, and so this idea that we now have a monopoly that we are going to exploit is just not true."
And while Guertin stresses that Anthem welcomes more competition, she says that alone wouldn’t drive down cost in any significant way.
"The price of health insurance, on or off the exchange, is a direct reflection of the underlying cost of care," says Guertin.
The cost, she says, is set by providers.
Alex Feldvebel agrees with that take. He’s Deputy Commissioner at the New Hampshire Insurance Department, and argues that because providers drive price, insurance company monopolies can actually be good things.
"The way it works out is, competition in the insurance market doesn’t necessarily help the consumer, in terms of lower prices for insurance."
This isn’t exactly Econ 101.
According to Feldvebel, what you’re buying with health insurance isn’t just access to health care…what you’re getting is a negotiator. Big companies like Anthem can walk into contract talks with more leverage.
It can say to a hospital, ''We can bring you this many bodies if you give us a good deal on their care.''
"And what does the insurance carrier need to get a good discount? It needs to be big. And have a lot of covered lives," says Feldvebel.
So if big insurance companies get even bigger by cleaning up in the exchange, Feldvebel is of the opinion that that could actually drive prices down.
He does walk this idea back, though, saying that in the long run more competition will be better for consumers.
And that competition may arrive.
David Crosby is Executive Vice President for MVP Health Care. His company will sell in the New York and Vermont exchanges when they open.
"And as things evolve throughout 2014, and the exchange within New Hampshire, we’ll be monitoring that, and evaluating whether we can be a part of it in 2015."
So it may not be long before consumers get at least some choice in their health coverage.