New Hampshire state legislators are considering two bills—one in the House, the other in the state Senate—that “would allow individuals and some businesses to purchase health insurance from out-of-state companies.”
On Tuesday, Senator Andy Sanborn (R-Bedford), one of 6 co-sponsors of Senate bill (SB-131) testified before the state Senate’s Commerce Committee about the need for the free market-style reform.
“Only in health insurance are we seeing such a restrictive (system) that doesn’t allow people to exercise their free will, to exercise freedom of the marketplace,” Sanborn told the committee.
“If they [New Hampshire consumers] are able to find a better product that meets their needs and is more cost effective, shouldn’t they allow to buy it?” Sanborn asked rhetorically.
“If it’s good enough for Alabama,” Sanborn said, “it should be good enough for New Hampshire.”
Introducing free market principles to health insurance, however, is no simple matter.
The 2010 Affordable Care Act (Obamacare), more than half a century of federal and state laws, a legion of state and federal bureaucrats, and a small army of health insurance lobbyists stand in the way of the New Hampshire legislators’ common sense, free market solutions to the ever increasing litany of Obamacare-induced consumer problems.
Northwestern University Law School Professor Steven Calabresi points the finger of blame at a 70-year-old federal law, the McCarran-Ferguson Act of 1945, that gave health insurers anti-trust exemption and allowed state governments and politicians to create 50 monopolistic/oligopolistic state fiefdoms for “crony capitalist” health insurers and their political allies.
The roots of the state health insurance monopolies and oligopolies can be directly traced to a federal law. Thanks to the McCarran–Ferguson Act, which was passed in 1945, each of the fifty states has the exclusive power to license health insurance within a state’s own borders even if, in doing so, a state directly burdens interstate commerce by shutting out-of-state insurers out of the market… The McCarran–Ferguson Act essentially sets up fifty separate state monopoly or oligopoly markets, each with its own set of state licensed health insurance providers.
Advocates for a free market in health care, such as Prof. Calabresi and Rep. Phil Roe (R-TN), have long argued that only free market solutions can improve the performance of our health care and health insurance industries, and that the first step that must be taken is the repeal of the crony capitalist-friendly McCarran-Ferguson Act. In 2013, Roe introduced a bill in the House of Representatives aimed at accomplish such a repeal, but it went nowhere.
So, despite moves by state legislators in several states to allow out-of-state health insurers to compete in their states, at present 50 cozy state health insurance oligopolies are operating. Meanwhile, recent financial statements indicate that the health insurance industry is doing very well.
As Bloomberg reported on Wednesday, “U.S. health insurers that waged a campaign against Obamacare hit an all-time high on the stock market Wednesday after UnitedHealth Group Inc. (UNH) said it would add hundreds of thousands of new customers because of the law.” Bloomberg adds that the company’s “shares have more than tripled since April 2010, the month after the law was passed, compared with a 72 percent gain in S&P 500.”
High profitability in the health insurance industry is not limited to UnitedHealth. “Aetna Inc. (AET), Anthem Inc., Humana Inc. (HUM) and Cigna Corp. (CI) all also hit record highs Wednesday. Together, the companies make up the biggest for-profit insurance providers in the industry,” Bloomberg reported.
In New Hampshire, the profitable state health insurance market lurched from a very loose oligopoly to a virtual monopoly when a law sponsored by then-State Senator and current Democratic U.S. Senator Jeanne Shaheen, SB 711, went into effect in 1995.
Anthem Blue Cross and Blue Shield, a subsidiary of the publicly traded subsidiary of Wellpoint Inc., was one of 26 companies licensed by the New Hampshire Department of Insurance licensed to compete for the health insurance business of New Hampshire residents in 1994. Representatives of that company, according to Conrad Meier, writing at Heartland.org in 2004, encouraged Shaheen to introduce and champion SB 711 into law.
That law, as Meier wrote:
Required insurance companies to guarantee-issue individual health insurance policies. Companies were prohibited from denying coverage to any person or eligible dependent.
Imposed price controls, in the form of modified community rating, on individual health insurance premiums. Premiums could be modified or adjusted only for age, not health status.
Prohibited insurers from increasing premiums by more than 25 percent until January 2000.
As Watchdog reported, by 2004 “the number of insurers in New Hampshire decreased from 26 to five: SB711 drove 21 health insurance providers out of the state.
Golden Rule was one company forced out of New Hampshire by Shaheen’s bill, according to Lee Tooman, at the time one of the company’s vice presidents.
“In 1994, Golden Rule had a thriving business in New Hampshire. We insured a lot of people and paid millions of dollars of claims expeditiously and accurately. But Blue Cross complained that carriers like Golden Rule were doing great harm in New Hampshire. In fact, the only entity suffering harm was Blue Cross,” Tooman told Meier in 2014.
As Meier wrote at the time:
“Jeanne Shaheen’s 1994 reforms ended up freeing Blue Cross of its money-losing business and handed it a virtual monopoly in the individual market,” Tooman continued.
“Blue Cross returned to the individual market, able itself now to ‘cherry pick.’ But it still has the provider discounts no one else can touch.”
“Ten years after ‘reform,'” he said, “the market has not recovered.”
Anthem Blue Cross and Blue Shield quickly became the dominant player in the New Hampshire health insurance market, as others were forced out.
By 2014, four years after Obamacare passed (the outcome in the U.S. Senate was dependent on Shaheen’s vote in favor) Anthem Blue Cross and Blue Shield was, in effect, the only health insurance provider in the state of New Hampshire.
“New Hampshire is a market crying out for competition,” Thomas D. Policelli, CEO of Minuteman Health Inc., said in December 2013. “The market there is effectively controlled by a monopoly.” He was announcing his company’s intention to enter the New Hampshire health insurance market and compete with Anthem Blue Cross and Blue Shield.
Since then, four additional new competitors have entered the market. So far, however, it looks as if none have made much of a dent on Anthem Blue Cross and Blue Shield’s stranglehold.
And Minuteman Health’s entry into the New Hampshire health insurance market is not exactly the kind of free market competition most economists had in mind.
As New Hampshire Business Review (NHBR) reported recently, the company is “a member owned CO-OP which has already received an $88 million [federal] loan to offer policies on the exchange in Massachusetts” It “will get a $67 million federal loan” to compete in New Hampshire, the magazine adds.
NHBR also noted that “[t]he U.S. Department of Health and Human Services will be financing the expansion through a little-known ACA program to encourage the formation of CO-OPs (Consumer Operated and Oriented Plans), which operate like mutual savings banks. So far, HHS has sponsored at least two dozen of these plans, including one in Maine.”
According to Open Secrets, Shaheen’s successful 2014 re-election campaign received $110,783 in contributions from individuals and PACs associated with the insurance industry, and $194,215 from individuals and PACs classified as health professionals.
Among the health insurance executives who donated to Shaheen’s campaign was Mary Beth Donahue, Vice President of American Health Insurance Plans, “the national trade association of the health insurance industry,” who contributed the maximum $2,600, according to FEC records.
Ms. Donahue served as the chief of staff to Secretary of Health and Human Services Donna Shalala when she served in President Bill Clinton’s cabinet.
The conservative group Americans For Prosperity highlighted Shaheen’s record of passing legislation that pushed health insurance companies out of New Hampshire in this July 2014 independent expenditure commercial. But Shaheen’s opponent in her 2014 re-election campaign, former Massachusetts Senator Scott Brown (R-MA), couldn’t capitalize on the issue.
You can see the AFP ad here:
Shaheen defeated Brown by a comfortable 3-point margin, 51.6 percent to 48.4 percent in November 2014.
While free market supporters around the country are hoping the New Hampshire state legislators succeed with their bills to allow out-of-state health insurance companies to compete for business in the state, the institutional forces arrayed against such common sense solutions to the health care problems arising from Obamacare remain formidable.