John C. Goodman

The single most important feature of the Affordable Care Act (ObamaCare) is the establishment of a health insurance exchange where people will be required to buy health insurance if they are not insured by their employer or a government plan. As envisioned by its supporters, the exchange will be a model of competition.

But rather than moving toward a competitive world, we seem to be moving toward the opposite extreme: monopoly. Major consolidation is underway both on the provider and insurer sides of the market. And while this trend was already underway before Barack Obama became president, without doubt it is accelerating because of ObamaCare.

The following bullet points describe what things look like in the market for commercial insurance in major Texas cities:

·Blue Cross already has 70% of the market in three of the nine largest metropolitan areas.

·In all of them, and for the state as a whole, more than 60% of all customers buy from only two insurers.

Since the passage of the health reform bill, Harvard Pilgrim has announced its departure from the Medicare Advantage market (leaving 22,000 enrollees to search for coverage elsewhere) and the Principal Financial Group has left the health insurance market altogether (leaving 725,000 people behind). Many other small- and medium-sized insurers are struggling to hold on.

What is causing the immediate problem? One big problem is a new federal requirement that insurance companies spend no more than 15% of their revenues on “administration.”

In almost every state, rarely does a session of the legislature adjourn before someone files a bill to require the public schools to spend a certain percent of their income “in the classroom.” How well does this work? Here is Michael Barba’s description in a forthcoming NCPA Brief Analysis:

"Nationwide, schools spend an average of about $10,000 per student each year. On average, 60 percent of this is instructional, according to the National Center for Education Statistics (NCES). Instructional spending includes such things as teacher and staff salaries, extracurricular activities such as sports or academic clubs, and classroom supplies. However, each state can define instructional spending as it chooses, and expenses labeled as instructional are often not exclusively classroom expenses. In Texas, for example, the upkeep of vehicles, equipment and computers, as well as food service, travel, property insurance and refreshments for meetings are all considered instructional…

John C. Goodman

John C. Goodman is President of the Goodman Institute and Senior Fellow at The Independent Institute. His books include the widely acclaimed A Better Choice: Healthcare Solutions for America and the award-winning Priceless: Curing the Healthcare Crisis. The Wall Street Journal and National Journal, among other media, have called him the "Father of Health Savings Accounts.”