"They aren't friends to consumers."

Harry Reid doesn't appear to be receptive to canceling the insurance industry's anti-trust exemption:

Reid (D-Nev.), who will play a key role crafting the final Senate healthcare overhaul in the next few weeks, is excluding a proposal to repeal a loophole that exempts health insurance companies from federal antitrust laws.

Although the proposal is very popular with Democrats and liberal groups, Reid has concerns that attaching it to the healthcare legislation risks damaging prospects for an effort already facing significant hurdles.

Republicans say Reid is being calculated in a different manner, dangling the standalone bill as a way of intimidating the companies into making concessions on Obama’s broader healthcare objective. But they will have to overcome recent testimony from former Senate Republican Leader Trent Lott, who backed a broader effort to lift the exemption for the entire industry.

Many Republicans actually support the end of the anti-trust exemption because they believe it would be a vehicle to expand interstate sale of insurance and essentially deregulate the industry, which would not be to the benefit of the consumer. And Reid himself has backed a repeal of the McCarran-Ferguson Act, which gave the industry the exemption, for many years. So if he's brandishing it as a club, he doesn't appear to be doing much of a job of it.

Unfortunately, there are too many people in the halls of Congress willing to give the industry exactly what it wants - a forced market without competition from a public option. Future Congressman John Garamendi, who for eight years was California's Insurance Commissioner, explains why that is a disastrous outcome.

Some in Washington are seriously considering penalizing Americans for being unable to afford care in a marketplace that doesn't control costs. If voters in the 10th Congressional District choose me to be their representative in Congress, let me be clear. I will not vote for any bill that includes the individual mandate unless I am confident that bill offers generous subsidies for Americans struggling to make ends meet and unless that bill includes the public option to provide real competition in the health care marketplace. I regulated the insurance companies for eight years as California's State insurance Commissioner, and I know those companies well enough to know that we can trust them to put profits before people. They aren't friends to consumers.

In California in the first half of this year, according to data provided by the insurance companies to state regulators, PacifiCare denied 39.6 percent of all claims, Cigna 33 percent, Anthem Blue Cross 28 percent and Kaiser 28 percent. 45,000 people died last year in the United States because of a lack of health care coverage. These are not statistics you see in the rest of the industrialized world. Profits ahead of people, greed ahead of the general good is no way to run a health care system.

The Democrats had better figure this one out. If the public gets the sense that their representatives are being run by the insurance companies, they will take their frustrations out in next year's elections.

Hitting The Insurance Industry Where It Hurts

John Conyers and some allies on the House Judiciary Committee have come up with a fabulous way to get the insurance industry in line - by threatening to remove their anti-trust exemption.

Many people don't know that the insurance industry, under the McCarran-Ferguson Act of 1945, has a broad anti-trust exemption that facilitates regional monopolies. The Act allows states to regulate the insurance business instead of the federal government, but also allows that, as long as the state regulates the industry, federal anti-trust laws would not apply.

As a result of this exemption, states have seen markets for health insurance where one or two companies predominate. In the state of Maine, Wellpoint controls 71% of the market. In North Dakota, Blue Cross controls 90%. Using the Herfindahl/Hirschman Index, a metric for market concentration, a 2007 study by the AMA found almost every health insurance market in the United States is highly concentrated.

This edition of the study analyzed 313 MSAs. This compares with 292 metropolitan areas in the 2005 study, 84 in the 2003 study, 70 in the 2002 study, and 40 in the 2001 study.

In terms of market concentration (HHI), the study found the following:

In the combined HMO/PPO product market, 96 percent (299) of the MSAs are highly concentrated (HHI>1,800), applying the 1997 Merger Guidelines.
In the HMO product market, 99 percent (309) of the MSAs are highly concentrated (HHI>1,800), applying the 1997 Merger Guidelines.
In the PPO product market, 100 percent (313) of the MSAs are highly concentrated (HHI>1,800), applying the 1997 Merger Guidelines.

Here's the AMA study. Paul Rosenberg has a lot more on this.

The point is that the concentration of the health insurance market among regional monopolies leads to higher costs for consumers, almost by definition. What the legislation by Conyers (D-MI), Hank Johnson (D-GA) and Diana DeGette (D-CO) would do is end that anti-trust exemption for health insurers, allowing for enforcement in all of these highly concentrated markets. The Senate has companion legislation:

“This legislation would specifically prohibit price fixing, bid rigging, and market allocation in the health insurance industry,” said Conyers. “These pernicious practices are detrimental to competition and result in higher prices for consumers. Conduct that is unlawful throughout the country should not be allowed for insurance companies under antitrust exemption. The House Judiciary Committee held extensive hearings on the effects of the insurance industry’s antitrust exemption throughout the 1980s and early 1990s. It became clear then that policyholders and the economy in general would benefit from eliminating this exemption.

“The legislation we introduced today is intended to root out unlawful activity in an industry grown complacent by decades of protection from antitrust oversight. In doing so, we aim to make health insurance more affordable to more Americans. I want to thank my friend Senator Leahy for his leadership on the bill and for working with the House on this joint introduction.”

Many of the actions taken by the insurance industry over the years simply violate federal law. Repealing their anti-trust exemption would force the industry to end their criminal ways or face punishment. As a companion to insurance regulations designed to lower prices for consumers, but perhaps without the kind of enforcement necessary to maintain it, I couldn't think of anything better. And if nothing else, this legislation is a powerful whip to keep the industry in line as they try to extract more perks from the health care bill. Combine this with the multiple investigations into industry practices from Dennis Kucinich, Henry Waxman and others, and you have real pressure on the industry for the first time in a while.

Good for John Conyers.

Reid On Board With Public Option

Strong words from Harry Reid on the public option.

Reid opened a private meeting of health care providers in Las Vegas on Tuesday by saying, according to one attendee who took notes: “We have a problem in America and it’s called the private insurance industry.”

Reid went on to express support for a public option, the proposed government-run insurance plan that he compared to Medicare, saying any meaningful reform legislation would have to include a public component.

Nevada’s main progressive group said the majority leader’s comments during Tuesday’s meeting of about 20 hospital CEOs, doctors and other health care providers was among the most significant statements they have heard on his thinking.

“We’re energized and we’re also confident that Sen. Reid is on the right side on this issue,” said Michael Ginsburg, a community organizer at the Progressive Leadership Alliance of Nevada, who attended the meeting. “That’s something we can take to our supporters and reassure them.”

Couple things here. First of all, Reid is up for re-election and it's going to be a dogfight, with Reid already behind in the polls. Because of his leadership position, he is caricatured by the right as a liberal ideologue, and members of his own party find him not able to compete procedurally in the Senate and get the Democratic agenda passed. But Reid has always been solid on fighting the insurance industry, which he once called the enemy of most everything we do today. And that principle has held up, despite his re-election battle. Surely Reid knows that Democrats must pass a bill if they have any hope of a decent showing in the 2010 midterms.

Second thing is that this offers good evidence that Reid may split the bill, getting the public option and other budget-related measures through on reconciliation, with the non-budget items coming in a second bill under regular rules with 60 votes. The second bill could wait until a successor is elected for Sen. Kennedy, by January 26 at the latest, if not earlier if the law is changed. Anthony Wright has a good piece about bill-splitting examples in the states when it comes to health care reform. Policy should trump process in this case.

Third thing is that Reid should threaten to repeal the McCarran-Ferguson Act that gave the insurance industry an anti-trust exemption. This has allowed the insurance industry to highly concentrate in almost every state market and has offered precious little choice. Just the buzz of repealing McCarran-Ferguson will send the insurance industry into battle mode, and the public option would be seen as practically benign by comparison.

...or, maybe, not at all.

During a tele-townhall with constituents today, Senate Majority Leader Harry Reid said he supports a public option...but then he added an extremely important caveat. Reid said he doesn't think the public option ought to be a government run program like Medicare, but instead favors a "private entity that has direction from the federal government so people that don't fall within the parameters of being able to get insurance from their employers, they would have a place to go."

That sounds suspiciously like Reid would prefer a so-called co-op system, which almost all reformers regard with suspicion, and many regard as a non-starter.