Alabama’s insurance monopoly

Alabama is one of the least competitive states for health insurance, according to a study released Wednesday by the American Medical Association.

The stark conclusion should disturb Gov. Robert Bentley.

Bentley recently announced the state would take no part in developing an insurance exchange designed to inject competition in the state’s monopolistic health insurance market, punting the responsibility to the federal government.

The AMA study examined health insurance market shares and concentration levels in all 50 states and the District of Columbia. It concluded Alabama was the least competitive in the nation in both the commercial health insurance and preferred provider organization markets. The state is the second least competitive market for health maintenance organizations.

The lack of competition hurts consumers. Insurance companies with monopolies charge higher premiums, reduce benefits and inflate their profitability.

“It appears,” the study concluded, “that consolidation has resulted in the possession and exercise of health insurer monopoly power.”

The Affordable Care Act, lambasted by Bentley, includes numerous mechanisms designed not only to increase access to health care but to control costs. One of the most promising cost controls is state-run exchanges.

The exchanges force insurance companies to compete on relatively equal terms for consumer dollars. Individuals and employers have the ability, through an exchange, to compare insurance policies with identical benefits. In order to attract customers, insurers will have to keep rates as low as possible.

Until the issue became politicized, Bentley recognized the advantages of an insurance exchange. He accepted federal funds and appointed a panel to study the creation of such an exchange. The panel concluded it was feasible and could be administered in a way that would cost the state budget nothing. Bentley’s panel recommended the state set up an exchange. Bentley rejected the recommendation.

One of Bentley’s consistent complaints about a state-run exchange is that federal rules fail to specify how it should be run. He calls this a federal failure, but in fact it provides flexibility for state government to design an exchange tailored to Alabama’s unique market.

The AMA study is a reminder that at least one element of the Affordable Care Act is desperately needed in Alabama. It is a shame that Bentley’s political fear of embracing any part of “Obamacare” is preventing him from adopting a reform that would benefit Alabamians.

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Filed under Alabama politics, Health care, Obamacare

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