Some actuaries tell me that neither letting carriers shop for easier states in which to do business nor ending mandates will make much of a dent in premiums. Here’s why: In virtually every state, one or two insurers dominate, and the big boys are able to negotiate very steep discounts with health care providers (on the order of 50 percent from the retail price with hospitals and 40 percent with doctors). For the most part, the price these providers charge determines how high premiums will go.
Even if companies want to move into a new state with fewer mandates and less regulation, they would still have trouble competing. They might save on administrative costs—and maybe get a boost from having no mandates to contend with—but they’d be no match for the dominant players. Most likely, a new entrant would not have a network of providers of its own and, instead, would have to rent a network of doctors and hospitals. Rent-a-network providers typically give discounts only in the 10 to 15 percent range. Policies sold by the new carrier may be cheaper, but not as low as those offered by the major carrier. “It’s an ineffective policy tool,” says one actuary.
But suppose freeing the carriers to sell policies wherever they wish does attract some new contenders that want to give the old gang a good fight. What’s in store for policyholders? If a carrier is now subject to looser rules in a new state, its policyholders in the old, more strictly regulated one might lose some of their protections—limits on pre-existing conditions clauses and appeal rights, for example. Perhaps they would lose most from the benefit package itself. In the insurance business, cheap policies mean skimpy benefits. The new policies just introduced by Blue Cross and Blue Shield of Georgia show what might be offered.
A healthy twenty-five-year-old living in Atlanta could pay as little as forty-one dollars per month for one of the company’s new SmartSense policies. (A bargain, for sure.) The first three doctor visits are covered, requiring a thirty-dollar copay. After that, the young man would have to dig very deep in his own pockets to pay for care. The policy comes with a whopping $20,000 deductible, and additional doctor visits and hospital care are subject to that deductible. After the man meets his deductible, he would pay 30 percent of his bills as long as he uses in-network providers; 40 percent if he doesn’t. You can hardly call that insurance.