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Saturday, August 22, 2009

Lack of Competion, or Rules?

A new study claims that lack of competition among insurance companies is one of the reasons for our high health care costs. As an example the article points to Maine, where one company has 71% of the market.

What they don't mention is that MaineCare, a "government option" plan, and Maine's guaranteed issuance laws, along with community ratings laws have driven health care providers from the state. The Wall Street Journal just published a nice article about the failure of MaineCare.

The markets these studies find the least competition in are the markets in places like Maine, New York, and New Jersey, where guaranteed issuance and community ratings have made premiums high, and choice low as insurers leave due to losing too much money.

Since the Urban Institute did the study, and is a proponent of public option, it's not surprising that they chose Maine as an example. What better state than one who's public option (and other rules) has destroyed the private market place to claim "lack of competition" without including the public plan as part of the equation.

If in fact we want competition in the insurance marketplace here's a novel idea. Make a level federal playing field for insurance companies, and get rid of the laws that prevent sales of policies across state lines. Then see what happens. My guess would that Maine would no longer have it's insurance problems.

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