The New Health Dialogue

We confess. We stopped worrying about Capitol Hill long enough to give our undivided attention to the Oscars last night. But it occurred to us that DC and LA may not be as far apart as we thought. The Center for Responsive Politics informed us that Best Actor Oscar winner Jeff Bridges was also poised to win the ‘money-in-politics Oscar.’ (We’d also like to point out that the Daily Beast recently decided that DC is not the ‘Hollywood for Ugly People’ after all -- their calculations show that D.C. is more attractive than California.)

But then again, in LA celebrities walk down the aisle.  In Washington these days they seem to shout across it -- often about the rising price of health insurance.

A new analysis from Goldman Sachs found that competition among big insurance companies is down, and premiums are rising. The analysis was based largely on a recent phone conference with Steve Lewis, vice president of employer benefits consulting firm Willis.

“We feel this is the most challenging environment for us and our clients in my 20 years in the business,” Lewis explained. “Not only is price competition down from a year ago,” he explained, “but trend of (health care) inflation is also up and appears to be rising. The incumbent carriers seem more willing than ever to walk away from existing business resulting in some carrier changes.” In other words, they are hiking prices and dropping clients.

On insurance plan design changes this year, Lewis notes, “incrementally the changes are more substantial, but visually to employees, they’re fairly significant ... just about everybody did something this year."

White House communications director Dan Pfeiffer commented on the analysis on the White House Blog. “The last few days have brought even more evidence," Pfeiffer wrote, "that the health care status quo is working out great for the insurance companies -- at the same time as it continues to fail American families and businesses … On Wednesday, a leading insurance broker laid out in clear terms what many Americans could already guess: the insurers’ monopoly is so strong that they can continue to jack up rates as much as they like -- even if it means losing customers -- and their profits will continue to soar under the status quo.”

The lack of competition or "oligopolistic" nature of the health insurance industry does make it easier for insurance companies to walk away from clients and still make a profit. It is increasingly difficult for small and mid-size businesses to find and maintain affordable health care coverage for their employees. Health reform will mean insurers have to play by different rules. We need to realign incentives and implement insurance market reforms to make the system  work for everyone -- individuals, businesses, and yes -- the insurers. And incremental insurance market reforms just aren't the answer.

The White House is using this analysis, like the widely-publicized WellPoint 39 percent premium increases, as fuel for reform. The President called attention to it this morning in a speech to Arcadia University. Speaking to an enthusiastic crowd in Pennsylvania, he noted the Goldman Sachs analysis and said:

Every year, insurance companies deny more people coverage because they have a preexisting condition. Every year, they drop more people's coverage when they're sick and need it most. Every year, they raise premiums higher and higher.

These insurance companies have made a calculation. Listen to this, the other day, there was a conference call organized by Goldman Sachs; you know Goldman Sachs.

An insurance broker told Wall Street investors that insurance companies know they will lose customers if they keep raising premiums. But since there's so little competition in the insurance industry, they're okay with people being priced out of health insurance because they'll still make more by raising premiums on the customers they have. And they will keep doing this for as long as they can get away with it.

So how much higher do premiums have to rise until we do something about it? How many more Americans have to lose their health insurance?

We know the answer. Now if we could get Congress to pass it as quickly and as enthusiastically as we cheered when Sandra Bullock got Best Actress for "The Blind Side."

Read the full Goldman Sachs analysis here.