Liberal Activists Seek Justice Department Probe of Insurance Industry

May 20, 2009 - 5:29 AM
Activists backing President Barack Obama's health care overhaul are asking the Justice Department to open a wide-ranging investigation of what they say is monopoly-like power in the hands of major insurers.
Washington (AP) - Activists backing President Barack Obama's health care overhaul are asking the Justice Department to open a wide-ranging investigation of what they say is monopoly-like power in the hands of major insurers.
 
The move by Health Care for America Now has consequences for the debate on Capitol Hill, since health insurers have been working closely with lawmakers to find a compromise that would expand coverage and curb costs.
 
The letter sends a message to Democrats that many of their constituents don't trust the industry. Indeed, the activist group is one of the strongest supporters of setting up a government health plan to compete with private insurers.
 
"A lack of antitrust enforcement has enabled insurers to acquire dominant positions in almost every metropolitan market," said the letter to the Justice Department, signed by Richard Kirsch, the group's director. "The failure to attack anticompetitive practices has enhanced the dominant positions of these insurers. This must be reversed."
 
The letter, dated Tuesday, asks the Justice Department to crack down on industry practices that allegedly infringe on the doctor-patient relationship, and to re-examine whether dozens of insurance company mergers in recent years have undermined competition.
 
In a report earlier this year, the American Medical Association found that insurance markets in most major metropolitan areas were dominated by two companies, and in many cases only one. In all, 94 percent of the metropolitan areas met the government's definition of "highly concentrated" markets for health insurance.
 
Separately, a recent report by the congressional Government Accountability Office found that in most states, a single insurer dominates the market for small business health insurance, even though many companies offer coverage. The GAO found that the median, or midpoint, statewide market share of the largest insurer was about 47 percent, although the median number of licensed carriers was 27.
 
Insurers have discounted such findings, saying their industry is closely regulated by state consumer protection agencies and is actually quite competitive.
 
But antitrust lawyer David Balto, who also signed the letter to the Justice Department, said it would be a mistake for the Obama administration to allow private insurers to assume a leading role in revamping the health care system.
 
"For a market to work effectively, you need two things: choice and transparency. Neither of those are present in the insurance market," said Balto, who served in a senior position at the Federal Trade Commission during the Clinton administration. "Relying on the current insurance market as the foundation for health care reform is like trying to cross the Atlantic in a raft."
 
The letter called on the Justice Department to investigate what it said were industry practices that tie the hands of doctors. These include contractual "gag clauses" that prevent doctors from referring patients to a better insurance plan, and "most favored nation" provisions that prevent doctors from giving a lower price to a competing plan.
 
Separately, Health Care for America Now is releasing a report that shows consolidation in the health insurance industry has coincided with soaring premiums. The group, a coalition of liberal activists, community groups, labor and others, says its mission is to help pass Obama's health care plan.