My guiding principle is, and always has been, that consumers do better when there is choice and competition. That's how the market works. . . And without competition, the price of insurance goes up and quality goes down. And it makes it easier for insurance companies to treat their customers badly -- by cherry-picking the healthiest individuals and trying to drop the sickest, by overcharging small businesses who have no leverage, and by jacking up rates.Wall Street Journal, October 1, 2010:
Financial services provider Principal Financial Group Inc. is exiting the health-insurance business in an early sign of expected consolidation as the impact of the health overhaul becomes clearer.New York Times, October 1, 2010:
UnitedHealth Group Inc., the country's largest health insurer by revenues, Thursday agreed to renew the policies of Principal's roughly 840,000 members as contracts expire. Terms of the deal weren't disclosed. Analysts pointed to the agreement as a sign that big insurers could have a bright future gobbling up smaller firms' membership.
The federal health overhaul passed in March has prompted worries among regulators and industry groups that smaller insurers might have difficulty competing under rules that require insurers pay out between 80% and 85% of premiums on medical care.
More insurers are likely to follow Principal’s lead, especially as they try to meet the new rules that require plans to spend at least 80 cents of every dollar they collect in premiums on the welfare of their customers. Many of the big insurers have been lobbying federal officials to forestall or drastically alter those rules.More evidence that Obamacare is "the worst of all possible worlds."
"It’s just going to drive the little guys out," said Robert Laszewski, a health policy consultant in Alexandria, Va. Smaller players like Principal in states like Iowa, Missouri and elsewhere will not be able to compete because they do not have the resources and economies of scale of players like UnitedHealth, which is among the nation’s largest health insurers.
Mr. Laszewski is worried that the ensuing concentration is likely to lead to higher prices because large players will no longer face the competition from the smaller plans. "It’s just the UnitedHealthcare full employment act," he said.
(via Critical Condition)