Although encouraging private health insurance companies to compete for customers by lowering premium prices in Minnesota sounds like a politically correct conservative position, we know for a fact that it doesn't work.
We know this because there has never been anything stopping health insurance companies from competing against each other in our state. These companies have chosen on their own not to compete.
We know for a fact that health insurance companies are regulated by the same rules and laws that property and auto insurance companies are governed by. It seems like there is not a day that goes by that I don't get a solicitation from an auto insurer to consider them over my current provider and save hundreds of dollars a year.
Health insurance companies choose not to compete because they know the cost of health insurance is not controlled by competition. Engaging in short term sales promotions by lowering premiums cause major financial issues for them, which are corrected by raising premiums the next chance they get.
There are five major factors that increase or decrease health insurance premiums:
1) The cost of medical procedures and drugs - These prices are set by the medical community based on use, pharmacy company profit, scarcity of medical personnel, new buildings going up, million-dollar babies being born, and people getting sick in general. The best an insurance company can do is make an educated guess and hope they are in the ballpark. If they are too far off they must raise premiums the next year, regardless of competition.
2) The size of the pool of people they insure. If they have more customers, the medical expenses are averaged over a larger number of people. Since some people don't get sick the average goes down. On the reverse side, if they lose customers, premiums go up.
Insurance companies have figured out that competing for customers can hurt them if they don't have the lowest price. It is easier for them to simply abandon the state then try to sell a product they can't price high enough to make a profit.
This is the major reason we see insurance companies competing heavily only in certain areas and leaving less profitable areas behind. This is the same reason we don't have any mom & pop grocery stores anymore. This is also the main reason Medicare works so well. Everyone is in the same pool and the government uses this advantage to bring down individual costs rather than paying company executives huge salaries and bonuses and paying higher dividends to stockholders.
3)Providing inadequate policies that do not cover the most expensive procedures can bring down monthly premiums. Since insurance is a method to avoid risk, buying this type of policy is making a bet that you won't need health care when you get real sick. This would be like purchasing a $200,000 house and insuring it for $50,000.
Not many people will do that, but they may be willing to roll the dice on their own lives. There is a reason that banks make you fully insure when they give you a mortgage to buy a house. Think about it, when someone buys inadequate insurance, gets sick, and goes bankrupt (extreme medical expenses are the number one reason for bankruptcy) who ends up paying for it?
I would suggest that there is only one type of policy that works for everyone. One that insures you against all types of sickness at a price you can afford. Considering anything less is a recipe for disaster.
4) The fourth factor is government providing subsidies to bring down insurance costs. The main reason people don't have health care or buy inadequate policies is they can't afford the cost.
Every civilized country in the world, except the United States, has recognized that making sure everyone is insured, (even if the government has to kick in), lowers costs. People seek out primary care physicians to do preventative care. This has been proven to bring down the need for costly intervention for diseases like cancer because you don't get sick when you take care of yourself.
This is also the reason that MNsure policies are going down by up to 20 percent this year. What good does it do to get a $200 tax cut if you use it all up in one month paying higher insurance premiums?
5. Not allowing people to get insurance if they are already sick. Each individual needs to make a choice: Do you feel it is fair that sick people should have to risk their lives without insurance, so my insurance premiums are slightly less? I cannot fathom this as a Christian person.
So, when you hear a politician claiming they can bring down health care premiums by promoting competition, they are blowing the proverbial smoke from their rear orifices.
Politicians or government have very little say in a private business deciding to compete in an area. Corporations can say they care about many things, but their most important consideration is the bottom line. If they don't make a net profit, they cease to exist.
Health insurance companies don't set premiums, so the medical community knows what to charge. They react to the existing conditions, they have little control over, and set their premiums so they can make a profit.
There are many good ideas out there for lowering health care premiums that have a great deal of research and thought put into them. Promoting competition is one of the lowest rated. If your true concern is lowering your medical costs, you may want to go with logic instead of politics.