Since Health insurance premiums are a closely guarded secret, it's unlikely ANYONE knows the real reason.
Apparently you didn't understand my question. That's ok -- I'll explain. There are a set of reasons for why it varies by state, but the largest of them are the state laws regarding what benefits must be offered. In a world where any policy could be sold across state lines, without regard to state regulation of what policies must contain, the obvious answer is you could just buy the cheapest policy, even if in your state certain things had to be covered. That's why it doesn't work.
You mean.. unlike now?
To compete in Alabama, a health insurance company would have to create another company (that they own) and that company could ONLY sell insurance in Alabama where BCBS has 83% of the market. How do you break into a market where ONE company already has 83%, and that's the ONLY market you CAN sell to? That's a HUGE barrier to competition.
Alabama? Which insurance markets are you referring to? Let me guess: individual and/or small group. The reason why those markets have less competition is because they're less profitable, and a lot more fluid. (it also helps that the population size of the individual/small group markets is substantially less). Were you aware that ERISA plans (the plans that most employers use, and most people are covered under) are exempt from all these requirements?
There's also the fact that you have to build a network in order to compete -- without a network, you aren't able to enter a market. You could of course buy one, but those networks tend to not be very complete and also tend to cost more than if you negotiate the contracts with individual providers yourself.
Of course, I have to wonder if there is such a monopoly, what allowing folks to sell across state lines would do to break up the monopoly? In 2008, there were 11,521,238 people insured through the small group market. In 2001, there were 12,409,788. The non-group market had 6,700,000 enrollees*(According to AIS data. IIRC, the actual number is closer to 14M, but AIS doesn't have a breakdown of those). Of that market, individual BCBS plans had about a 45% share, with WellPoint having a 35% share. The rest was largely in 1-2% shares, with Humana having a 4.5% share.
http://www.ahipresearch.org/pdfs/2009IndividualMarketSurveyFinalReport.pdf
Premiums by State. Individual insurance premiums vary significantly by state, reflecting a variety of factors, including
premium rating and underwriting rules, differences in health care costs, demographics, and consumer benefit
preferences.
Table 3 (on page 6) illustrates average premiums reported in the survey by state for single and family policies.
Carriers were instructed to assign each policy to the state on which its premium was based, rather than to the state in
which it was originally issued. Data from states with relatively few policies reported by survey respondents are
included in the national totals, but are not shown separately.
Consistent with prior surveys, Table 3 illustrates that premiums tend to be higher in New England and Middle Atlantic
states with guaranteed issue and community rating rules. Of course, the data on premiums by state are more
uncertain than the national averages, because the response level in many states was relatively small. However, the
general patterns in this survey correspond with previous results, and continue to indicate that rating rules that allow
purchase of individual coverage at any time, or that substantially compress rates between older and younger
applicants, can be associated with higher average premiums.
You confuse Insurance mandates, with insurance laws. Mandates are the requirements that WE MUST HAVE insurance. Insurance laws are those passed by the state that effect which benefits insurance companies can and cannot offer within that state.
No, I didn't confuse them. Insurance mandates is a part of insurance regulation, which is a state right.
Only one state, that I know of, has a minimum benefits law (and that is bankrupting the state). All others allow their citizens to opt out of having health insurance.
Minimum benefits in the health insurance offered? That's false, they're the mandates you're referring to. The state you're talking about is obviously MA, and they're having issues for a variety of reasons.
Seriously? When it's simply a branch of your current business, that's easy. Just open an office and start selling. Send representatives to bid for contracts with corporations and governments.
You don't understand the interplay between the various different health insurance markets. The governments, for example, wouldn't qualify under your monopoly argument.
Additionally, things like Medicaid MCO contracts aren't included in this discussion; they're not small group or individual group market contracts. I'm also not even sure that a Medicaid MCO would have to be incorporated in your state to win one of the contracts. I'd have to look and see.
When it is a small part of your business, the expense/returns are fairly profitable. However, when you are talking about it being your ONLY business. If you don't get someone else's customers fast enough, your business goes under.
If a branch of your business isn't profitable, you can choose to get rid of it. You can start a company with as much feeder cash as it needs, considering it's a wholly owned subsidiary.
you do realize that they broke profit records this year.... right?
http://hcfan.3cdn.net/a9ce29d3038ef8a1e1_dhm6b9q0l.pdf
You're missing what I said:
Overall, the profit margin for health insurance companies was a modest 3.4 percent over the past year, according to data provided by Morningstar. That ranks 87th out of 215 industries and slightly above the median of 2.2 percent. By this measure, the most profitable industry over the past year has been beverages, with a 25.9 percent profit margin. Right behind that were healthcare real-estate trusts (firms that are basically the landlords for hospitals and healthcare facilities) and application-software (think Windows). The worst performer was copper, with a profit margin of minus 56.6 percent.
Profit margin is low. You're also ignoring (and that article ignores) the biggest factor in the increased "industry profit":
WellPoint sold a segment of their business for ~$2B.
The results included net after-tax income of approximately $2.2 billion, or $4.79 per share, resulting from a gain on the sale of the NextRx pharmacy benefit management subsidiaries ("NextRx"), partially offset by costs for restructuring activities and intangible asset impairments. Excluding these items, adjusted net income for the quarter totaled $536.0 million, or $1.16 per share (see page 14).
But facts? Why would we care about these things, you're citing political propaganda afterall.
As I stated above, a company CANNOT sell insurance across state lines without incorporating in that state.
For instance, BCBS doesn't sell in Alabama. Blue Cross Blue Shield of Alabama sells Insurance in Alabama. That's a separate company, owned by BCBS.
Yes, I know how insurance works. You don't understand how BCBS works, though. BCBS is an association. BCBS companies can go public; if they do so, they are bought by WellPoint.
Companies choose not to, because they are effectively barred from doing so.
One company in this state has 83% of the market. You can fight for them if you can draw on the income from your 83% of your state's market. If your only income is from the state you are trying to break into... then you will not survive.
I'll ask again:
83% of which market? How large is that market? Which set of markets? Who owns the rest of that market? How much market presence do other insurers have in other markets in that state?
One big reason is state mandates. We all pay high premiums because of things we really do not need. If we do not need to be covered for In-Vitro Fertilization or substance abuse. You really need to do your homework and look at the silly crap many insured people must pay for because it is mandated by your local government.
Also, it is not strictly legal to sell medical insurance across state lines. This is one of the big issue with the republicans that want insurance reform; again, do a little research.
We have a long history of selling insurance across state lines; auto and motorcycle insurance comes to mind.
Bob Maxey
Suggesting I do a little research when I know more about it than you do is rather amusing, Bob.
Yes, there are some things we don't need that are mandated (in some states). There are other states with no mandates. There are other states with practical things mandated (i.e. coverage for if you are pregnant -- that's a pretty standard one, because insurance companies had been refusing to offer it to women). Maybe you should be going to your state government about whatever it is that they mandate coverage for that is raising your premiums?
If, you know, you happen to be in either the individual or small group markets. If you happen to be in an ERISA plan, you would fall under the
MENTAL HEALTH PARITY AND ADDICTION EQUITY ACT OF 2008, which would seem to indicate that that isn't such a silly standard, wouldn't it?
I know exactly what the Republican's stance on health insurance was. I also know why it's silly for them to be pushing on one hand to allow insurance to be sold across state lines while at the same time pushing for state rights -- if you have to modify your plan to sell it in my state, then it doesn't save you any money, and in fact costs you more money because you have to build out a network/etc.
