Health insurance & antitrust laws/economics [updated]

In my prior diary, I discussed the the issues surrounding why a public option in terms of creating a downward pressure on pricing is important.

http://www.mydd.com/story/2009/8/24/12138/8249#commenttop

I mentioned the monopolistic tendencies of the insurance market. Due to the statements of Harry Reid, I want to quickly go into greater detail as to why the insurance market represents market failure in the form of being monopolistic.

Reid states:

"Reid spoke at both venues about the antitrust exemptions health insurance companies have enjoyed for decades as part of the problem with the industry."

http://www.lasvegassun.com/news/2009/aug28/reids-views-overhaul-taking-shape

This is also being discussed at Daily Kos in the following diary:

http://www.dailykos.com/story/2009/8/28/ 773622/-Harry-Reid-comes-out-in-strong-s upport-of-public-option-(UPDATED-x2,-quotes,-antitrust-explanati on)

The insurance market is monopolistic for two reaons, the laws favor monopolies and the economics of the industry due to high cost of sufficiently pooling risk to produce a viable insurance.

The first reason that insurance companies tend toward monopolies is that they are exempt from federal antitrust laws.  Before discussing the law that exempts healthcare insurance, I should begin with a paragraph explaining what antitrust law  is meant to address.

The core idea behind antitrust law in an economic sense is to address market failure in which due to a lack of competition a player or a small number of market players can obtain monopoly pricing.

Despite what conservatives now describe as "markets" (which is actually free market fundamentalism rather than capitalism has it had come to be understood), the basic ideas of "markets" is that there should be sufficient number of players such that none can truly affect pricing at equlibrium. Think of this way, there are 20 people all negotiating for the price of  Car X with 20 suppliers of Car X. Eventually, the 20 people and 20 suppliers will reach some price that is an average price such that they can sell and buy that car. The version of monopolies that are important here is where there is only one supplier, and, thus, that one supplier will have the power to determine pricing in a way that having competition will not allow. Or, if you prefer, when someone has you over a barrel because theyare the only game in town- you are not going to be able to bargain for a better deal.

In the monopoly (again in layman's terms) of the healthcare industry, many individual geographic locations in the U.S. lack any competition, and therefore, the pricing is solely determined by the insurance company. The basic idea behind this is the law of supply and demand- Everything else being equal, you will buy the cheaper service or product over the more expensive one. But, here you are not given a choice.

That's the cental irony of the Rovian conservative frame about this issue. With the present system, you have no choice, but they pretend as if you do. Healthcare is not only a failure of choice of whether you will actually not consume (since if you need a kidney you are going to have to the surgery and will not shop around for a lung instead). Healthcare is a failure of choice of how you finance getting that kidney. "We got you over a barrel. You need a kidney. We are only game in town that are going to finance that deal. So take what we got to offer or leave it. " Including the risk of them not covering your kidney surgery, the pricing that they charge you regarding the surgery and several of market power tools that are available to monopolies.

Now, as to why, private health insurance in American tends to be monopolistic, as I said, there are two reasons- the law and economic.

The first reason is that health insurance is exempted from the federal antitrust laws. I am not the biggest fan of Wikipedia, but I think this will give you a quick run down of the law shaping antitrust exemption for health insurance companies under McCarran-Ferguson Act:

"McCarran-Ferguson Act, 15 U.S.C. § 1011, is a United States federal law that allows state law to regulate the business of insurance without federal government interference. The McCarran-Ferguson Act was passed by Congress in 1945 after the Supreme Court ruled in U.S. v. South-Eastern Underwriters that insurance could be regulated by the federal government via the Commerce Clause (the overturned case stated that the federal government had this power), or, in other words, that insurance was interstate commerce."

http://en.wikipedia.org/wiki/McCarran-Fe rguson_Act

This is part of the reason you can assume that anyone discussing ending state regulation of private insurance is full of crap. The goal here should be to increase federal regulation so that federal antitrust law applies to health insurance companies in coordination with state laws.  There are many reasons for why such a policy change is desireable. One is that we want to coordinate a systemic national policy rather than rely on local governments to overcome the corruption that may occur to the dominance of local insurance companies. Another is that we may want to set policies about pricing that can not easily be addressed at the local level.

The second reason why we see monopolies in the insurance market, and the reason why a change in antitrust law is probably a necessary step to real reform, but insuffient, is that health insurance as a market is naturally monopolistic.

"Natural monopoly occurs when, due to the economies of scale of a particular industry, the maximum efficiency of production and distribution is realized through a single supplier."

http://en.wikipedia.org/wiki/Natural_mon opoly

For the sake of simplicy, I once again use Wikipedia. You may wonder why I say that health insurance is naturally monopolistic? Well, the key to understanding why is to understand how health insurance and insurance in general works. It works through pooling risks, and, in the case of health insurance, it  should, but does not, work by reducing costs through how much any individual procedure costs or the cost of medication. There are few competitors tha will have the necessary capital for reserves to make this sort of business work.  When there are high barriers to entry, a market may tend toward monopolies. There are other reasons as well, but for now, I will just say that we can not fully address the issue of reform unless we accept the tendency toward a lack of competition.

There is, in a moderate sense (rather than centrist triangulation to the crazy right), a few reasons why government intervention is typically deemed necessary when monopolies arise. One of them was first layed out by Theodore Roosovelt, a Republican who first busted trusts, and thus giving up antitrust laws.  One of those reasons is market failure, which monopolies certainly are.

The fact that this is indispute should tell any true moderate  versus ape throwing poo conservative how poisoned political discourse is in America. We are discussing essentially regressive practices that have not existed for well over 100 years during the great area of monopolies that nearly destroyed American capitalism in the later part of the 19th Century.  Yet, we are seeing the Orwellian way in which these practices are described as the "moderate" view and choice.

[update 1] I may eventually diary this separately, but here is information that provides a primer on how concentrated the health insurance market is, and why it is example of market failure: http://www.ama-assn.org/ama1/pub/upload/mm/368/compstudy_52006.pdf and http://www.openleft.com/diary/14744/death-panels-vs-the-herfindahlhirschman-index. It is for these reasons that people say that any plan without the public option is not reform. As an industry, health insurance tends toward monopolies. There is nothing else being proposed that will address the underlying reasons for the industrial practices-- everything from recission to pricing should be seen in the light of monopoly abuse of market power.

Tags: Antitrust, healthcare reform, law (all tags)

Comments

51 Comments

Interesting point

I think you raise a very important point and something that is missing in all the noise. I am not a lawyer but my reading of this act was as long as insurance companies are regulated at the state level the Federal government will not get involved. This limits the anti-trust laws from being applicable to insurance industry. But as can be seen this has not stopped some insurance companies from becoming behemoths. They might adhere to the state laws while setting up shops in multiple states, or in the case of UHC, they just buy up multiple subsidiary companies all across US and setting up monopolies while gaming state regulations and also anti-trust laws.

So the question to me then is how do you apply anti-trust laws and federal regulations to the insurance industry? Do you repeal this act? Or do you add additional federal regulations and anti-trust regulations over and above the McCarran Ferguson Act?

by tarheel74 2009-08-28 12:21PM | 0 recs
Re: Interesting point

well one possible value of changing or repealing the law is that it opens the door for another tool.  If pricing right now can be considered creating monopoly profit for insurance companies, case law and polcy could create yet another downward pressure on private insurance pricing.  For example, government imposed price control where even with the public option firms are obtaining monopoly rents.

http://en.wikipedia.org/wiki/Price_ceili ng

The idea being if there is no competition, then pricing can not be brought to a market rate without it being a monopoly profit in any other way.

by bruh3 2009-08-28 12:58PM | 0 recs
Re: Interesting point

Price control is not the answer.  Well, let me explain...it's not the long-term answer.  Price fixing is only a very-short to short term fix to a product price/supply question that in the long-term will cause either a rationing of service or product.  In a free-market.

Your on the right track, but the method here is not applicable.

by TxDem08 2009-08-31 04:35AM | 0 recs
Re: Interesting point

I am not advocating a particular approach. Just that there should be the tools in the tool box that we can use. That is, if the industry has something really to fear other than spending all their money on lobbying. If they are spending it on law suits, then they don't have time to muck up as much in DC. That's the Machivellian part. The other part is just having the ability to place fear into them over their monopolistic behavior to say "okay, there willb e consequences." What they are? I don't know if anyone should be given as a definite solution> I know price control has a lot of problems. I would not advocate it as the first resort. But I do believe in having as many tools as possible rather than less.

by bruh3 2009-08-31 12:10PM | 0 recs
Re: Interesting point

Understood.  What you want to be looking at is a move by Sen. Bricker-OH...'55...Network Television Oligopoly case/investigation by the Senate.

However, you'll have better luck getting a true Universal Healthcare package before getting the Senate to really inquire the Health Insurance industry in this form.

by TxDem08 2009-08-31 08:26PM | 0 recs
Re: Interesting point

I have no doubt the WH and Congress (especially the Senate) will avoid the issue.  This is my tell actually for the White House being under corporate control: they are blocking the DOJ's efforts to go after other monopoly issues that require only the execution of existing laws, and, rather than breaking down the too big to fail banks, they have been busy with aiding the consolidation of banking power even further. I am curious to see how they will address media consolidation.

I am just putting the question o ut there. I am fully aware that nothing will be done about it in terms of the issue here- which is what type of capitalism do we want in America? It is easy to frame this as right versus left, but as I remind people Teddy Roosovelt was against the capitalism we are seeing coming to power in this country now. I liken it to what I remember of the capitalism of the late 19th century during the era of the Robber Barons, but that's just on what I remember of the history of the era.

Right now, people are so stuck on the left versus right frame that they don't realize there are some more fundamental practical issues at play here.

One of the signs of this for me in Congress are the Blue Dogs. I may do a diary about this l ater, but I find the whole notion that they are either moderate or fiscally responsible to be a joke. They are far from it. A moderate is concerned, for example, with monopolies because monopoles for over a century have been understood to be one of the true examples of where competition is not working. Instead, you have the Blue Dogs trying to sabotage any competition, and by doing so, raising the cost to the government and the American people's debt.

Check this out:

http://firedoglake.com/2009/08/31/blue-d og-health-plan-to-increase-insurance-pre miums-bureaucratic-costs/#comments

by bruh3 2009-08-31 09:13PM | 0 recs
Removing the antitrust exemption

will not do anything.  Nothing in the Sherman, Clayton, or Robinson-Patnam act does anything to prohibit natural monopolies per se, only the abuse of an already-existing monopoly.  

by JJE 2009-08-31 10:26AM | 0 recs
Re: Removing the antitrust exemption

It would open up the ability to litigate for additional remedies if necessary. I don't beleive this WH would do so given the political corporate Dems of the WH are already blocking the DOJ  on existing antitrust case law that could be brought to address the conslidation issue of oglicarhs rising into power in America. However,  ironically while claiming they don't want to politicize the DOJ over marriage equality for gays.

by bruh3 2009-08-31 12:08PM | 0 recs
Additional remedies based on what?

What is the anticompetive activity you are alleging here?  I don't see any claims in the diary aside from the fact that these companies have monopoly power.  You need more than just that to state an antitrust claim.

by JJE 2009-08-31 02:08PM | 0 recs
Re: Additional remedies based on what?

How would you "see" anythng before the law is changed and someone pursues the question? I am raising the question. It is more interesting to me tht you are certain of the answer.

by bruh3 2009-08-31 03:51PM | 0 recs
All I am saying

is that removing the antitrust exemption, with no other changes, is not enough to create liability on the part of insurers, unless you think they are using their existing monopolies to monopolize other markets.  That is what I remember being taught by Thomas Kauper.

Are proposing additional substantive changes that would make a monopoly in and of itself illegal.

by JJE 2009-09-01 08:52AM | 0 recs
Re: All I am saying

short answer: there is no way for you to know what you claim to know

by bruh3 2009-09-01 09:17AM | 0 recs
Longer response

You have no idea what you're talking about, and when the problems with your "argument" are politely pointed out to you, you obfuscate and respond with nonsensical non sequiturs.

by JJE 2009-09-01 09:25AM | 0 recs
Re: Longer response

I am going to ignore you here on out. Good luck.

by bruh3 2009-09-01 09:56AM | 0 recs
Re: Longer response

...you obfuscate and respond with nonsensical non sequiturs

bruh3 SOP.

by fogiv 2009-09-01 10:57AM | 0 recs
Re: Longer response

 What exactly is the point  of you and others posting other diary hijacking? There are 3 people in this diary (2 of whom are lawyers) asking and saying the same things. Can you take your personality stuff somewhere else rather than hijcking my diary with it?

by bruh3 2009-09-01 11:03AM | 0 recs
Re: Longer response

I see you saw where he took a post of mine and edited it to make it look like I said something I didn't say.

by Jess81 2009-09-02 07:14PM | 0 recs
Re: Longer response

Yep.  Pretty standard.

by fogiv 2009-09-03 12:17AM | 0 recs
Re: All I am saying

They (the insurance co.'s) are by far and away manipulating other markets.  There is plenty of examples of collusion, creation of market barriers to entry and price/payment abuse.

Those in each of their singular instances are abuse of a monopoly situation and also fall under an anti-trust violation.

by TxDem08 2009-09-01 11:42AM | 0 recs
Which markets?

Those in each of their singular instances are abuse of a monopoly situation and also fall under an anti-trust violation.

Not also.  The abuse of a monopoly situation, to be an antitrust violation under the federal laws, must be at attempt to further monopolize.  It is not enough to just say "you are abusing a monopoly situation, therefore antitrust violation."  You have to say more about the nature and purpose of the abuse.  If, for example, you are simply a price higher than you would in a competitive market, that would not be an antitrust violation.  If, however, you are trying to shut out competetition by making exclusive dealing contracts with medical providers, then it may be.

by JJE 2009-09-01 12:26PM | 0 recs
Re: Which markets?

Ah, thank you.  Each and every instance of allowing "networks" to accept/reject certain prescriptions and pharmacies and the price/payment of items/accessories associated with them are prime examples.

I understand your point under federal laws, however I can economically and mathematically show the attempt to "further monopolize" the above arrangement(s)IS an attempt to further monopolize and prevent entry into the market.

In your example it would not be a price higher than the competition it would a price significantly lower, in addition to withholding access and payment of service(s) and procedures through the barrier of specific network choice.  However, as I also stated in other posts, it's not a monopolistic definition that needs to apply, it's an oligopolistic definition since there are few major players who control the access and the prices/payments services through merger and acquisitions to crowd out or swallow up competition.

It's easy to apply the economic mathematical equations to see where and how economic 'profit' is applicable to the oligopoly and how it is being manipulated.

The bigger point is...who is going to be a big enough S.O.B. to jump into that shark tank.  Obviously it won't be Obama or the D.O.J., so while in all this is although quite entertaining to me, it's still an academic exercise and nothing more.

by TxDem08 2009-09-01 02:33PM | 0 recs
Re: Removing the antitrust exemption

But virtually every abusive insurance company practice would arguably give rise to an anti-trust issue.  It's not about questioning the insurance companies' right to exist in the first place.

by Steve M 2009-08-31 12:42PM | 0 recs
Not really

maybe you could gin up some kind of price discrimination theory, but it does not make out an antirust violation simply to have (1) a monopolist; (2) some bad act by that monopolist.

by JJE 2009-08-31 02:06PM | 0 recs
Re: Not really

Yes, I'm pretty sure I could "gin up" a price discrimination claim under the federal antitrust laws in many common situations.

by Steve M 2009-08-31 04:59PM | 0 recs
Get to it!

Treble damages await!

by JJE 2009-09-01 08:48AM | 0 recs
Re: Get to it!

The funny part is that above you attack me for not knowing what I am talking about, and when Steve M questions you here as well as Tex below, you continue with the same line of argument or completey ignore Tex in favor of personal attacks above.

Like I say above- I don't understand your certainty.  This is why I want to ignore you. but the other trolls have shown up so I feel I must answer.

That issue of your certainty is by the way not a non sequitur as your misuse of the term attempts to argue.

No one has really  brought these questions up because since 1945  health insurance has been exempt from anti trust law. So , how can you know for certain what the impact of the laws are since they have never been fully litigated? yet you are certain. It is truly bizare.

by bruh3 2009-09-01 11:11AM | 0 recs
What questions do you think are being raised?

It is a fundamental principle of antitrust law that monopoly alone is not a violation absent an attempt to leverage that monopoly into monopoly of another market.  This has been litigated in hundreds, if not thousands, of cases.  Neither you nor Steve M nor TexDem08 have provided any reason whatsoever to think that this principle would not apply to the insurance industry as well if the exemption were removed.

Apparently, to the extent I can tell from your terse and unclear responses, you are now trying to argue that maybe that well-established oft-litigated principle won't apply in the insurance industry for some unexplained reason, but you are unable or unwilling to elaborate why anyone should assume that courts will rewrite fundamental antitrust doctrine for no reason other than that an exemption for one industry has been removed, other than that it's "uncertain."

I know you're very proud of your law degree, but if you had submitted "arguments" like these when I was clerking, I would have advised the judge to Rule 11 you.

by JJE 2009-09-01 11:59AM | 0 recs
Re: What questions do you think are being raised?

Health insurance has been litigated regarding monopolies? It does not matter what industry, product or economic factors ?  Natural monopolies are not subject to anti trust issues?

Really? You may want to tell Microsoft and the many people that debated that antitrust case.

Paul Krugman discussing the issue of health insurance here:

http://krugman.blogs.nytimes.com/2009/06 22/competition-redefined

Discussing how with out a public option many states will be a one insurance provider monopoly.

Digby's post on the same:

http://digbysblog.blogspot.com/2009/06/m onopoly-money-by-digby-our-good-friend.h tml

Here's a long list of googled topics covering regulation of natural monopolies

http://www.google.com/search?hl=en&q %22natural+monopoly%22+regulation&b tnG=Search&aq=f&oq&aqi

Here's a discussion of Microsoft as a Natural Monopoly and anti-trust law applicability to it. The signifance is that natural monopolies can be reulated and addressed.

http://thismatter.com/articles/microsoft .htm

http://tutor2u.net/economics/content/top ics/monopoly/natural_monopoly.htm

Definition of the term and traditional response provided by Stanford about the Microsoft case:

    "Natural monopoly: A market that has high natural barriers to entry (usually because of increasing returns to scale) is referred to as a natural monopoly because such a market has a tendency to become a monopoly. Indeed, in the presence of increasing returns to scale, a market that consists of a single large producer is the most economically efficient.

    Traditionally, governments have dealt with natural monopolies by granting an official monopoly to a business and introducing regulations placing substantial controls on the behaviors in which that business is allowed to engage. (e.g. what pricing schemes are allowable).

Electical power and telecommunications are examples of natural monopolies that have been subject to government regulation. Recently, however, there has been a move in the United States towards deregulation of telecommunications and attempts to restructure markets so that the conditions that produce natural monopolies are eliminated."

http://www-cse.stanford.edu/class/cs201/ Projects/microsoft-vs-doj/glossary.html

The last paragraph dovetailing nicely into why we need a public option.

The point of the Microsoft example by the way is that yes, new industries, tend to not be so easily addressed until they are addressed.

The thesis I am making is straight forward- the necessary market size to operate in the insurance company in healthcare means that the market will tend toward oligarch or monopoly.

Here's another link discussing how antitrust plays a role in natural monopolies:

http://books.google.com/books?id=pSG__dm 7tYUC&pg=PA55&lpg=PA55&dq%2 2natural+monopolies%22+%22antitrust+law% 22&source=bl&ots=SOLfn-y9mi& sig=QzgX3fJJlLQDRsjqHzKP9U8jMxU&hl=e n&ei=oX2dSsrQD86e8Qa55ZGnAw&sa=X &oi=book_result&ct=result&re snum=1#v=onepage&q=&f=false

The natural monopoly point goes into why we need the public option, but it also suggests additional regulation in the other forms possible within the antitrust frame work.

by bruh3 2009-09-01 01:02PM | 0 recs
Re: What questions do you think are being raised?

by the way, thankfully people like steve m, are here to actually add to the points I am trying to make however haphazaardly I need to mke them with you.

let me add here that although I try to respond to your bait regarding natural monopolies, the discussion in the diary itself is one of tendency toward natural monopolies.

by bruh3 2009-09-01 01:22PM | 0 recs
Re: Get to it!

So what's stopping me?  Oh yeah, the very same antitrust exemption that this diary advocates we get rid of.

I realize bruh serves as something of a punching bag for the kool kids at this site, but it's not like he's the first person to suggest that something productive could be accomplished by eliminating the antitrust exemption.  I suggest you call up Senator Leahy, or perhaps Congressman DeFazio, and tell them that the next time they hold hearings on the Insurance Industry Competition Act you want to come testify and tell them that repeal of the antitrust exemption will accomplish nothing. I look forward to hearing you make your case.  However, I suggest that you refrain from name-dropping your law school professors during your testimony, as it may come across badly.

Realistically, in a few minutes with Google you could come up with many more cogent arguments for repeal of the McCarran-Ferguson antitrust exemption than this humble litigator could ever hope to offer.  But I'll offer up this document as a starting point.

by Steve M 2009-09-01 01:16PM | 0 recs
Finally

someone came up with some actual anti-competitive activity.  Cartels, price coordination, classic anticompetitive behavior, and it only took a day of me beating my head against the wall trying to get esteemed counsel to understand a simple point.  I apologize for not discovering this myself.  Even though I did a few minutes of googling, I didn't find it and decided I had fulfilled my obligation to make your argument for you.

I'll be sure to name-drop Leahy and DeFazio at my testimony.  

by JJE 2009-09-01 03:28PM | 0 recs
Re: Finally

The fact is Steve M and I responded to you in an open blog in which we are all probably doing this as a side note to our other daily functions.  Indeed, much of what I write is quickly discovered information that I provide for the reader.

I note that you don't respond with any information that illustrates that he's wrong. You do not even respond to the links provided by him or I. You just respond by acting like an ass.

For the record, the diary I wrote above  as are my comments . something that are meant as a quick run down on some of the issues that come up and have come up in the healthcare debate.  This should be self evidence. Indeed, I link to multiple sources just so people can have a basic primer on concept.  You have yet to link to 1. Here with Steve M, you have yet to link to 1 with him either. You name dropped, and called by he and I ignorant.

This is meant to be a general topic discussion. Not a treatise or dissertation on the subject. But, when people provide you additional information, and your response is the same. You will excuse them for not feeling the need to address some dick who  knows nothing of the subject matter of healthcare or enough about how it impacts antitrust law, but is 100 percent certain that it will have no impact.

Indeed, you never say , "sorry, I was wrong about being certain. " You just continue to be a dick about it.

by bruh3 2009-09-01 03:47PM | 0 recs
A general topic discussion

in which you provide no reason for anyone to think that your proposed solution will contribute to solving the discussion.

Thanks for clarifying that you're just offering general topics for discussion, rather than arguments that anyone should bother taking seriously.

by JJE 2009-09-08 08:52PM | 0 recs
Re: Finally

This is a long, detailed diary, to which you responded with a blanket assertion that "removing the antitrust exemption will not do anything."  Let's be clear about that.  Sorry that you consider rattling off your usual collection of snarky one-liners to be "beating your head against the wall," but maybe you could have done a little more research before saying "haha, it's a bruh diary, better make sure I show how much smarter I am than him!"

by Steve M 2009-09-01 05:02PM | 0 recs
Uh huh

and nothing in this detailed diary related to how repealing the antitrust exemption would increase competition or otherwise improve health care.  Your arguement reminds me of the people who think Liberal Fascism or Slander are legitimized because they have a lot of footnotes.

But it did give you an opportunity to snark about how smart you are, so I guess it served a useful purpose.

by JJE 2009-09-08 08:49PM | 0 recs
Re: Not really

Having a monopoly in and of itself is not illegal, and in a truly competitive market does not exist.  However price manipulation and/or abusing the power a corporation can/does wield with that monopoly IS ILLEGAL.

by TxDem08 2009-08-31 08:32PM | 0 recs
"Abusing"

is too vague to know what you mean.  And "price manipulation" is not a violation.  A monopolist can set whatever prices he wants, as long as there is no price-fixing conspiracy and no attempt by a supplier to establish minimum prices for retailers.

by JJE 2009-09-01 12:01PM | 0 recs
Re: "Abusing"

Abusing is too vague?  Let's use your examples.  Price manipulation in order to prevent entry to a market...is abuse.  As stated previously a monopoly in and of itself is not illegal.  Abusing the power that one has through a monopoly to prevent entry or to crowd out competitors is AN ABUSE OF MONOPOLY POWER.

Simple price-fixing is not the threshold for  violation.

by TxDem08 2009-09-01 02:22PM | 0 recs
We are in agreement

by JJE 2009-09-01 03:20PM | 0 recs
by TxDem08 2009-09-01 02:34PM | 0 recs
Yes

I am familiar with those concepts.  But I don't see how any of that addresses my point that the antitrust laws as currently interpreted, and even if the insurance exemption were removed, do not provide a remedy for those those problems.

by JJE 2009-09-01 03:20PM | 0 recs
Re: Removing the antitrust exemption

Insurance companies...are not NATURAL monopolies.  There are no efficiencies of scale or single providers.  If that were the case it would be a true or "pure" monopoly.

by TxDem08 2009-08-31 08:29PM | 0 recs
Talk to Bruh3

S/he is the one claiming it is a natural monopoly.  I'm sure the response will be a model of coherence, clear thinking, and good-faith engagement with your argument.

by JJE 2009-09-01 11:40AM | 0 recs
Re: Talk to Bruh3

The reply was to both of you.  Insurance companies may be naturally monopolistic, but are not Natural Monopolies.

They as mentioned in my other post above, in a reasoned and well thought out manner, are cases of oligopolistic (?) monopolies.

http://globaledge.msu.edu/ResourceDesk/g lossary.asp?Index=O
Oligopoly:
A market dominated by so few sellers that action by any of them will impact both the price of the good and the competitors.

And I should clarify now on my point of economies of scale.  Each company in and of itself does not recognize economies of scale in a form large enough to realize any utility with regards to price/performance structure.  However, with mergers and acquisitions economies of scale are realized only at the larger and more market dominant firms who through these efforts become more market dominant.  At some point though, the economies of scale diminish for firms such as United Health and BCBS simply due to the fact that the additional overhead and costs associated with acquiring competitors or crowding out competitors negates their economies of scale advantage, but still leaves their market dominance.

by TxDem08 2009-09-01 11:57AM | 0 recs
Thanks for the reply

and to be clear, the point about coherence was directed at Bruh3.  You, by contrast, do attempt to actually understand and engage with what your interlocutors are saying.

Aren't there economies of scale in the insurance industry?  Bruh3 seems to think that the economics of risk pooling results in an economy-of-scale barrier to entry.

by JJE 2009-09-01 12:13PM | 0 recs
Re: Thanks for the reply

first, the problem is your reading comprehension and tone:

I wrote this in the diary multiple times>

"I mentioned the monopolistic tendencies of the insurance market." I say that line several times throughout the diary. Not that they are in fact natural monopolies, but that they tend that way.  Read it.

Second, there are several economy of scales problems in healthcare. Risk pooling is only one.  But to dimiss is suggests you don't understand how insurance works. You can not have an effective insurance without the necessary scale of risk pooling of the barriers to entry, and yes, considering the need for reserves it is a major barrier to entry.  

There are others- the necessary size to affect pricing when negotiating with healthcare providers being one more.  

by bruh3 2009-09-01 01:17PM | 0 recs
Re: Thanks for the reply

I just wanted to be clear.

There are some economies of scale within the industry, however, as I mentioned as the "firm(s)" increase in size and scope of operation those economies of scale (EoS) diminish and you start to experience diminishing returns on the economic advantage.  However, financially those same EoS will provide a larger and larger financial profit as you move down the cost benefit analysis line.

by TxDem08 2009-09-01 02:38PM | 0 recs
Re: Talk to Bruh3

"Each company in and of itself does not recognize economies of scale in a form large enough to realize any utility with regards to price/performance structure.  However, with mergers and acquisitions economies of scale are realized only at the larger and more market dominant firms who through these efforts become more market dominant.  At some point though, the economies of scale diminish for firms such as United Health and BCBS simply due to the fact that the additional overhead and costs associated with acquiring competitors or crowding out competitors negates their economies of scale advantage, but still leaves their market dominance."

Isn't that cost related to the profit models? Afterall, wouldn't the most effienct approach be single payer regarding cost and overhead?

by bruh3 2009-09-01 01:34PM | 0 recs
Why is this relevant?

My narrow and consistent point throughout this diary is only this: removing the antitrust exemption will not, by itself, do anything to destroy health insurance monopolies.  It's beside the point whether they are natural or not, because the antitrust laws as they currently stand do not care.

You have not responded to that narrow (and banal for anyone who knows anything about antitrust law) point in any coherent way.  Instead you have tilted at windmills of your own devising.

by JJE 2009-09-01 03:18PM | 0 recs
Re: Why is this relevant?

Steve M above provides you information inthe form of a link. I provide you several links. You are being a dick and a lazy one at that. I am not here to keep trying to prove to some jerk information he can find on his own.

The diary was meant as a quick run down of some other issues that are a part of the healthcare debate. I imagine for several people this is the first time they even heard about healthcare being exempted from healthcare or that this represents a potential issue for monopolies,a nd if Tx prefers oligiarch or antitrust law.  Indeed, your own ignorance of the subject is pretty clear since you keep saying this is settled as a nonissue.

. I am raising the questions that are coming up on the subject that are not settled. You are saying you are certain that there is no antitrust issue in the face of the questions being raised. Moreover, you are doing so despite links that are a contra to your position. And you are doing it while being a dick about it. So, you will excuse me for not wanting to continue this debate with you.

by bruh3 2009-09-01 03:53PM | 0 recs
Re: Why is this relevant?

and by the way- the chief issue is that next year is a base year as are most off year elections. Which of the numbers matters? the independents who will not show up anyway or the democratic base?

by bruh3 2009-09-01 04:35PM | 0 recs

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