Free markets don’t work in health insurance

WASHINGTON — John Oxendine, Georgia’s Insurance Commissioner and candidate for the GOP nomination for governor, agrees with President Obama on at least one thing: health insurance companies need stricter government oversight. Oxendine has proposed a law that would allow Georgia’s insurance commissioner to block excessive health insurance rate hikes on policies sold in the individual market.

In the wake of the controversy surrounding health care giant WellPoint, whose insurance companies plan steep rate hikes on individual policies in several states, Obama has proposed giving the federal government the authority to deny excessive premium increases. About half the states provide mechanisms for ameliorating hikes in health insurance rates, but Georgia is not among them.

Oxendine tried to get a law passed in 2008 that would have given his office more control over premiums, but the Georgia General Assembly, struck by a wave of insurance-industry lobbying, refused to pass it. That’s no great surprise; the state legislature has always given consumers short shrift.

That leaves consumers who depend on the individual market  — those who don’t have employer-provided health insurance — especially vulnerable. As more workers are laid off, and as more businesses stop providing health insurance as a benefit, more people will be thrown into the individual market to purchase their own policies.

Last year, Atlanta Journal-Constitution reporters Andy Miller and Margaret Newkirk took a look at individual health insurance policies sold in Georgia. They wrote: “Policies are suddenly canceled. Monthly premiums rival the size of mortgage payments. Huge bills go unpaid because of surprising gaps in coverage.. .With individual plans, carriers can legally charge higher premiums based on age, gender or health. They can refuse to cover conditions that group plans routinely include, or deny coverage outright for people with problems such as arthritis or diabetes.”

Republicans claim that the arbitrary, confusing and consumer-unfriendly policies and practices that we euphemistically call a health care “system” can be transformed by relying on free market principles. At Thursday’s health care summit, they touted the virtues of “free market” fixes. But isn’t  that what we have now?

Workers with health insurance provided by a large company have the benefit of administrators who know the system well and know how to work it. (Cox, which owns the AJC, is self-insured; the health care plan is administered by Aetna.) Because a large company buys a lot of health care, it has clout with the companies that sell it. It can negotiate price reductions.

The individual consumer, left to negotiate a complex system on his own, has no such clout: He usually ends up paying through the nose since he can’t argue that he’ll take thousands of other customers with him if he leaves.

And there are other reasons that the health care market doesn’t operate like the market for cars or computers or flat-screen TVs. Sony and Samsung make their profits by selling as many of their products as they can. Health insurance companies make their profits by selling as many of their products as they can and then trying very hard not to actually deliver them.

Try to imagine that you’re awaiting delivery of your brand-new 50-inch TV, for which you’ve already made a hefty down payment. But the company calls to tell you that you violated some obscure clause in your contract, so they’re not going to bring it! In the health insurance world, it’s called “rescission.”

But the biggest difference between buying health insurance and that big TV is this: You can live without the TV. Health insurance literally enhances your prospects for a longer life. You can’t walk away from it as easily.

Once upon a time, political leaders realized that all Americans needed access to electricity, and they stepped in to ensure that all households got that small miracle at reasonable rates — something that the “free market” could not provide. Americans need a similar intervention in health care now.

187 comments Add your comment

jimbob

February 26th, 2010
5:41 pm

Another great viewpoint eloquently expressed Cynthia. You’ve crystalized the issue, and shown us why insurance reform should be a priority of the highest degree.

jimbob

February 26th, 2010
5:44 pm

That being said, now I happily await responses from your detractors who will claim you have made all this up because of your race.

PB

February 26th, 2010
6:21 pm

We do not have free markets in health care. Meaningful health care reform cannot happen until we are able to understand why health care costs keep increasing. There are more options available for care, more procedures that are done, more medications that can be offered and simply more health care provided now. But the consumer of health care does not see the true costs. The use of insurance to pay for health care masks the true costs.

We do not have true “free markets” right now as the author contends. And I’m not sure America has the guts to truly go that direction.

The reform proposals being debated do not address the reasons behind the rising costs and will not reduce health care costs. When insurance premiums skyrocket, we blame the insurance company. But the real culprit is the insured, not the insurer. As long as we demand more and more health care…we will have to pay for it.

ATLshirt.com

February 26th, 2010
7:07 pm

Once upon a time, political leaders realized that all Americans needed access to electricity, and they stepped in to ensure that all households got that small miracle at reasonable rates — something that the “free market” could not provide. Americans need a similar intervention in health care now.

Cindy, Was there a Mandate involved when they regulated the electrical industry ??? For those of you that do not understand, we are not REQUIRED by law to carry electricty in our homes.. we could do without if we wanted too.. Maybe if they (BIG BAD GOVERNMENT) were to get rid of the MANDATE on the healthcare reform, then the people would be all for the reform… I do not want to be facing JAIL or a HUGE fine, when I am not able to afford the premiums on the health insurance that they are trying to FORCE me to buy… You can not sit there and say that it will be affordable, when they have not yet released any figures as to how much those premiums would be… Now, if they were able to reform the electrical industry without putting forth a MANDATE, then I think that they can REFORM the healthcare industry without the MANDATE as well!!!!!

TnGelding

February 26th, 2010
7:28 pm

I think we’ve proven over and over that free markets don’t work, period. More later.

ATLshirt.com

February 26th, 2010
7:49 pm

what would you suggest TnGelding ??? Complete Government Control in everything ?? Where you live, where you work, how much you make, what you eat, what you wear, the car you drive that is if they give you one… Since you believe that Free market doesnt work… What would you prefer ???

QueDawg

February 26th, 2010
8:20 pm

Ms Tucker,

Congratulations, I know you are thoroughly upset at lack of response you are getting to your well written article. You can’t even get a rise out of your daily blog bashers because this is so cut and dry! They must be miserable that after reading your blog they were able to put their blood pressure medicine back in the bottle. Good Job!

AJC: Truth Detector

February 26th, 2010
8:37 pm

SO…………Cymthia is for SOCIALIZED MEDICINE………SURPRIZE….surprise…..surprise..

QueDawg

February 26th, 2010
8:40 pm

Darn, spoke too soon! I do not see anything, anywhere, saying CT supports socialized medicine.

Scout

February 26th, 2010
8:47 pm

NO! What Congress needs is a serious “intervention” !

B

February 26th, 2010
8:52 pm

yes I can’t wait for gov’t run healthcare. It’s going to be great. No more being put on hold, no more waiting in line, all my needs will be taken care of instantly and I won’t have to pay for it! It’s going to be awesome!

lait

February 26th, 2010
9:03 pm

democrats and liberals: i would say most of my conservative friends (we are not republicans) are for health care reform, but the dems messed it up so bad, tried to take too big of a bite, that it was likely an unworkable, unconstitutional bill loaded with union and special interest freebies.

QueDawg

February 26th, 2010
9:03 pm

B……..You are sadly mistaken my friend. I work in the healthcare industry and if thats what you THINK gov’t run healthcare is like then you are right, trash it because that is what it is now and it has gotta change!!!

ATLshirt.com

February 26th, 2010
9:03 pm

B, if you believe that, I got some beach front property in Tennesee that I would like to give you for free!!!

Captain America

February 26th, 2010
9:35 pm

How about this then.

Since healthcare is cheaper when a large company negotiates a heath care contract with an insurance company for thousands of employees, why not let individuals band together and form groups that negotiates contracts on their behalf just like a company does? The government could even form a group that anyone could join and the government would negotiate the contract with an insurance company. Simple solution. No government takeover of anything. There just wouldn’t be any more individual policies. You would just join a group.

Grumpy

February 26th, 2010
9:46 pm

Kaiser’s plans don’t break the bank, and they cater to individuals.

Dee keith

February 26th, 2010
10:05 pm

Rethugs aside the biggest problem with this healthcare debate from the very beginning was simple. A lot of Democratic Senators are caught between a rock and a hard place. They know the system needs reforming, but they have to do it in a way that dosen’t jepordize their funding to finance their careers as politicians, which only underscores how bad the SCOTUS decision was. As for the Socialized Medicine propagandist, until they have the guts to demand that Congress tell all of our VETS that the Dept. of Vet. Affairs is being abolished, because they don’t support SOCIALISM, then they
should be dismissed as simply IGNORANT.

Scott

February 26th, 2010
10:06 pm

Hey…. Socialism worked for the Soviet Un………………..Oh wait nevermind.

Kamchak

February 26th, 2010
10:30 pm

I know—let’s turn over health care to Wall Street and let them call the shots. Insurance companies can sell policies, Moodys can rate them, financial houses can package them into securities and Goldman’s can secretly bet against the health care policies, just like they did against the housing market.

As long as it’s all about the bottom line it’s OK–right? If it’s good for Wall Street then it’s good for Main Street–right?

Talk about you death panels….

:roll:

The Cynical White Boy

February 26th, 2010
10:32 pm

Ah, the Obama press releases (aka known as ‘columns’ by captive writers like Ms. Tucker) should get to the point – the Dems have polled their focus groups and the union bosses demand a pro-union health care bill from the guy they put in the White House – even at the risk of losing the mid-term elections.

Meanwhile, far away from the Obama press release palace, we here in the ATL can look forward to…..the return of FREAKNIK.

Ah, FREAKNIK. Just when you thought we were within range of the magical “post-racial” Obama-world. We return to the lovely smell of urine running in the clogged streets. Women – a few taunting, but most being assaulted by camera and/or by hand. Roving bands of ‘college students’ who re-inforce bad and sad steriotypes. Businesses shut down. Horrified looking tourists who happened to plan family trips on a bad weekend and will probably never give the ATL another look.

Maybe we’ll have some very enlightening TV interviews for the local ‘news’ casts which feature groups of females like the last good ol FREAKNIK in which they informed all of us uneducated and insensitive people that, (quote) “The white peoples, they have they spring break and nobody say nothing to them, uh huh.”

Yes, my friends. Once again, it’s FREAKNIK time.

mmm, mmm, mmm, Barack the LIAR Obama

February 26th, 2010
10:57 pm

The free market works ALL the time. If the dems would drop taxpayer coverage for low lifes and those that don’t think it’s important until they’re really sick, and instead concentrate on NO pre-existing exclusions – if you’ve had insurance all along, no lifetime limits and interstate policy competion, real health care reform could begin.

extremerighwing

February 26th, 2010
11:00 pm

cynthia…did it ever occur to you that dumbox is in the midst of a political campaign and that this fool will say anything to attract votes??

if the dim socialized health bill was so great, why didn’t they pass it when they had the votes?? because they started to hear from the people of this country and started worrying more about their re-election, kinda like dumbox…

you know…being a rep or senator must be a lot like a columnists for the ajc….you don’t have to do a heck of a lot and you get pretty well for it.

why don’t we pass a law that mandates everyone have a job as easy as yours!

neo-Carlinist

February 26th, 2010
11:07 pm

ALL insurance is a scam (for profit, as it were). It’s what the feds call racketeering. if you OWN property, it should be your CHOICE to insure or not (when the bank holds your mortgage or GMAC holds yout title, you don’t OWN the property). but who “owns” one’s health?

Russ555

February 26th, 2010
11:32 pm

The free market works for car insurance, casualty and homeowner’s insurance. Get rid of employer furnished health insurance and pools and let everyone buy their own insurance, and it would work for health insurance.

oldmac

February 26th, 2010
11:34 pm

Among other things, your silly TV analogy fails to mention the lawyer waiting to sue if somehow the TV doesn’t function properly.

JTex

February 27th, 2010
12:12 am

In order for a Free Market to function, there must be a balanced interaction between consumer and producer. Smith envisioned markets as vehicles for mutually beneficial exchange by which value is created by the producer and realized by the consumer in the exchange process.

Neoclassical economic models assume that the interaction of production (supply) and consumption (demand) will align to create an equilibrium price. Neoclassical models of competition (which have been largely replaced in current study by resource-based views of competition and others) assume that consumer choice will cause producers to innovate in terms of services offered, and that prices will reach a natural equilibrium in which services offered and prices charged balance.

The problem with applying this concept to insurance is that, in most cases, consumers lack choice in terms of their insurance provider. Not only is their no incentive for producers to innovate, there are no forces acting to drive prices down to a level in which both producers create wealth and consumers reap value. Corporations providing health care for employees as a benefit focus solely on price, rather than services offered. The incentive, therefore, is to reduce service in order to cut prices and attract corporate customers. The very forces that make REAL free markets effective are missing in this equation.

Michael H. Smith

February 27th, 2010
1:30 am

Workers with health insurance provided by a large company have the benefit of administrators who know the system well and know how to work it. (Cox, which owns the AJC, is self-insured; the health care plan is administered by Aetna.) Because a large company buys a lot of health care, it has clout with the companies that sell it. It can negotiate price reductions.

Isn’t that something Comrade Cynthia, what a novel concept, self-insurance? Is that anything like self-reliance? How do wonder can such a novel approach be brought to small companies or even say individuals? Kind of interesting you would bring up the electricity issue into this subject, wasn’t there something like member owned cooperatives that stepped into that picture to bring electricity to many rural Americans?

Government should never do for the people, what the people can do for themselves. Therefore, the Government should see to it that the people can do for themselves, instead of insisting that government must do it for them.

To TnGelding: I think it has been proven that laissez-faire markets don’t work any better than socialist markets. Fettered capitalist markets are the best at keeping the demons of the other evils two at bay. The ideal “Free market” simply cannot exist amongst this crowd of three.

doctorantigov

February 27th, 2010
2:45 am

In response to the Republican call for “free market fixes” you (the author) ask “isn’t that what we have now?” and yet later in the article you state there are other reasons healthcare markets do not operate like the markets like cars computers or tvs. Thats because the former is NOT a free market and the latter IS with real competition(that is until MR. BIG GOVT took over Govt Motors now making it look more like our healthcare market as it exists today. Poor understanding of the facts such as even the author here displays demonstrates clearly why so many on the left support free care because they do not know a free market from a regulated one. Maybe we should allow two votes per person if IQ is above a certain level and 1 vote for the rest? Ms. Tucker may get just 1 vote based on her writing in this piece unfortunately.

Michael

February 27th, 2010
4:08 am

So many people love to tout “self-reliance,” yet nobody except a few hermits here and there actually do it. When your wallet is stolen, do you track the person down or call police? If your house is on fire, do you grab buckets of water or call the fire department? To get to work, do you drive your car over roads you paved yourself? Do you take all of your letters to the recipients or use the mail service?

If people would stop equating government services with Nazi Communist Soviet shooting squads, they’d realize most the stuff ISN’T THAT BAD. Our water is clean, our food is mostly safe, we don’t live in towns with Taliban-like insurgents.

As for the doc above, the car industry isn’t “free.” Take a look at the Toyota recalls to see all the intervention by the NHTSA. Cars have to meet certain fuel economy and pollution standards because of government laws. Ever seen “off-road diesel” for sale? That’s because the government regulates the amount of pollutants in regular diesel more to make big rigs pollute less. Ever see commercials about cars that “exceed government crash-test standards?”

If you think government-run health care is so bad, please run for office on a platform of abolishing Medicare, Medicaid and the VA. Otherwise, you’re for some form of government-run health care.

PJ

February 27th, 2010
4:15 am

-We spend about 17% of our GDP on healthcare and the prices are steadily rising.
-Why are we the only industrialized nation that does not have universal healthcare?
-Other countries that have unihealthcare spend nothing close. Why are we ranked #37 in the world for healthcare service and yet we spend more money than ANY other nation in the world for healthcare?
-Why do 700,00 ppl file for bankruptcy a yr due to healthcare bills in the US, most of whom are in the middle class, and yet the U.K., Japan, Germany, and France combined have zero ppl filing for bankruptcy due to healthcare bills a year?
-Why are people morally okay with letting over 40 million of their fellow Americans be uninsured when their are other countries that have universal healthcare that have better service & lower cost.
Why?

TnGelding

February 27th, 2010
5:26 am

Why?

Because health insurance and health care are different things. Insurance is only a way to pay for care. Just because you don’t have insurance doesn’t mean you aren’t getting health care. More people die because they get care through insurance than die because they don’t have it.

vracer

February 27th, 2010
6:09 am

Sure, let’s give poor folks everything for free. Soon we’ll have nothing but poor folks.

Joel Edge

February 27th, 2010
6:20 am

There’s only one problem with that. The Rural electrification was set up, accomplished and now (if I remember right) the government turned them over to local ownership. It went from REA to EMC. Do you think that the government would ever get out of the medical regulation business.
You may remember me mentioning some health issues recently and being called a liar. I have been reviewing the cost of some of these procedures and the cost is outrageous. I know it’s fashionable to bash insurance companies right now. I’m not sure that the problem lies entirely with the insurance companies. Considering the cost of insurance compared to the listed cost of these procedures, I got a bargain. I know, nothing is free, spread the cost, etc. What I’m getting at is the cost of these procedures has spiraled. Back in my married days I pay off quite a few medical bills for spouse and kids and reviewed the itemized bills. They are astronomically higher now than ten years ago. We also need to be discussing medical cost along with insurance cost.

AJC: Truth Detector

February 27th, 2010
7:29 am

PB————The COST OF EVERYTHING—-EVERTTHING—–is going up—–you idiot———–NOT JUST HEALTH CARE…..YOU LIBERALS WANT QUALITY HEALTH CARE FOR A DIME.

stw

February 27th, 2010
7:50 am

And the very same individuals who are waiting for the big screen HD tv are the ones who would rather have this, the new car and extravagant vacations instead of covering themselves for health care and then sticking us with the extra cost when they have the emergency surgery, etc. or the illegals who clog the ER’s for whatever reason and because its their right. Don’t remember reading anything about this RIGHT in the Constitution. Thats the 13 page documents that the dems feel has outlived it’s time and they’re going to rewrite it in they’re MODERN FORM. THANK YOU BIG GOVERNMENT FOR TAKING CARE OF ME FROM CRADLE TO GRAVE…

stw

February 27th, 2010
7:53 am

We rank (?) so low because those countries that have UniCare set the pramaters for and conducted the polls. What would you expect? Remember, figures don’t lie, but liars figure…

stw

February 27th, 2010
7:56 am

CT: Did you remember to put the coffee on for Mr, Obama when you left the WH this morning ???

jt

February 27th, 2010
7:57 am

This from the AJC———————

“Georgia law provides that many health insurance policies cover certain tests and procedures, including mammograms, pap smears, colorectal screening, ovarian cancer screening and prostate cancer screenings.”

There are also over a thousand pages of state law dealing with the Health Insurance Industry. The last time we had had a free-market was about 60 years ago when, incidentally, medical care was cheap, efficient, and doctors still made housecalls. And then the FED got involved.

CT would not know the “free market” if it bit her.

ken R

February 27th, 2010
7:58 am

We don’t need massive health care to fix the problem, as Cynthia stated many states already have increases under control, without the Gov’t intervention.
I think Health Care reform is good as long as everyone in the house & Senate are on board with the same plan.

Down in Albany

February 27th, 2010
7:59 am

Part of the problem with the high cost of healthcare in Georgia is a result of our archiac “certificate of need” laws. Here in Albany we are held captive by Phoebe Putney Memorial Hospital. Their cost structure is the catalyst behind the high prices. They have waged a decades-long battle against Palmyra Medical Centers, preventing Palmyra from providing obstetrical services. Because Palmyra cannot provide those services, they are shut out of the majority of managed care contracts. Both facilities have spent untold millions on litigation that was completely unnecessary. The Department of Community Health has granted Palmyra the right to provide those services, but, Phoebe, int their infinite wisdom feels they know better. This scenario is playing out in other communities, as well…Columbus, Macon, Savannah and Gainesville, to name a few. The so-called “safety net hospitals” are the 900 pound gorillas…they sit wherever they dang well please. The lack of competition serves to drive up the cost of health care because, without competition, they charge whatever price they want.

Gordon

February 27th, 2010
8:03 am

You always choose the the extreme cases for the free market and use that as justification for throwing out the baby with the bath water. You pointed out how lobbyists interfered with Georgia setting stricter laws on insurance hiking rates on sick people. That was a government failure, not a free market failure. Let government do what it does best (regulate), and let the free market do what it does best. Government should curb the excesses of capitalism, not attempt to replace it. It can’t, which has been shown over and over again.

ck hall

February 27th, 2010
8:06 am

I guess you are an authority on health care too! Amazing how smart you are..Face it-Obamacare is a disaster!!!!!

neo-Carlinist

February 27th, 2010
8:18 am

ck, I don’t think anyone – besides Obama would disagree ObamaCare is a disaster (waiting to happen – because it hasn’t yet). BUT there is a disaster already in play, and it’s not a rich/poor thing. the current “disaster” is man-made. it’s a rigged game that ultimately profits those who run the game (healthcare poviders, insurance companies, drug companies, and sometimes lawyers). each “special interest” blames the other, but think about it, should a doctor or lawyer benefit ($$$) because you get sick? self-reliance IS the key, but we live in a nation where people on both sides of the aisle AND both ends of the income spectrum “rely” on others. you’re right it is a disaster, but it’s not Obama’s alone.

Dawg777

February 27th, 2010
8:20 am

I think it’s truly sad that most people in America are illiterate, at best, when it comes to the basic understanding of Economics and the “free markets”. Cynthia, you obviously are included in that lot as well. Our current health care system is not a “free market” system at all. Consumers are removed from the process through our current system of insurance where we have no idea what price we are paying for a service. Therefore, the “free market” is not truly free when describing health care. Also, have you ever heard of “Price Ceilings”? Google it and read up on the effect that Government intervention has on markets. It is an economic law. You cannot run from it or hide from it. We will all suffer with Government Health Care. We have so many idiots in this country that do not pay into the tax system yet want a free ride and want the productive citizens to pay for their laziness. Why do you think the “Government” is clairvoyant? They are beaurocrats where most of them have never worked a day of their life in a real job that actually competes and creates value. Do you want the same person that works at the Tag Office to handle your health care? Humans are motivated by incentives and Government employees have no incentive whatsoever to provide good service because THEY HAVE NO COMPETITION!!!! They can put you on hold when you call, treat you with terrible customer service, charge you any fee they deem necessary and arrest you if you do not like it. Is that your solution to health care Ms. Socialist???

SouthernGal

February 27th, 2010
8:21 am

No one has explained to me how insurance reform will work if the price of Health Care is not lowered. Or is this a way of getting rid of insurance companies?

Marine

February 27th, 2010
8:30 am

We have all kinds of choice on where to get our gas, why is the price always the same. So much for competition.

Joel Edge

February 27th, 2010
8:30 am

SouthernGal
Thank you. I agree, we need to be talking health care costs also.

[...] That leaves consumers who depend on the individual market  — those who don’t have employer-provided health insurance — especially vulnerable. As more workers are laid off, and as more businesses stop providing health insurance as a benefit, more people will be thrown into the individual market to purchase their own policies. Read full story [...]

DirtyDawg

February 27th, 2010
8:58 am

The only reason that the Healthcare Bill that is currently under consideration is such a mess is that Repubican obstructionists – the Party of ‘No Damn Way We’re Gonna Let You Accomplish Anything For America’…even if it is desperately needed…blocked, obfuscated, cussed, dragged out, and otherwise acted like a bunch of petulant kids that won’t play unless they get to name the game.

If the White House and Congress had just, or will do now, said ‘To hell with you ‘bought and paid for’ bas***ds, we’re gonna extend Medicare and provide a ’single payer’ system….and if you and your ‘owners’, the insurance industry don’t like it, we’ve got another alternative for you, we’ll make it a regulated monopoly like they have in a couple of European countries that works pretty damn well. This business of letting the ‘corporate tail’ wag the country’s dog is just bulls**t.

Morrus

February 27th, 2010
9:00 am

Vote out the incumbents and start over