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Goldman Sachs, which played a role in enabling Greece to hide its public debt, urged investors in March, 2010 to buy shares in two big health insurance companies, UnitedHealth Group and Cigna because their rates were sharply up and competition was down. According to the NYT, the White House claimed, “ the Goldman Sachs analysis shows that while insurers can be aggressive in raising prices, they also walk away from clients because competition in the industry is so weak.”  Rate increases ran as high as 50 percent, with most in “the low- to mid-teens” — far higher than overall inflation.  Kathleen Sebelius, the secretary of health and human services, stated on March 10, 2010, that she was left unconvinced after meeting with health insurance company execs at the White House the previous week because medical cost increases could not justify the rate increases. Furthermore, she pointed to the profit increases, some as high as 50%, in 2009 over 2008, and large executive salaries as evidence that the firms could have absorbed more of their cost increases than they did.  Cutting off customers when it is time for a firm to pay up while recording higher salaries and profits indicates that something is structurally wrong with the industry (and with the firms, ethically speaking).  If the execs lied at the White House, citing costs that “had to be passed on,” we ought not be so gullable at the managers’ claims in the future.  Also, if they were lying, we might recall Senator Rockefeller’s description of the insurance companies as sharks…feeding machines that are often not seen until their fins break the water-surface and their teeth are coming down on you.  Otherwise, the water is calm.

In February, 2010, the US House of Representatives passed a bill that would repeal the anti-trust exemption for the industry.  Armed with fresh retained earnings, the oligarchic industry was in a good place to fight that bill in the Senate.  In other words, the bill abruptly stalled. That the repeal was so difficult, if not impossible, to achieve is itself telling.  Once an industry has such clout and power that it can effectively veto legislation it doesn’t want—even as the firms cut customers off when they get sick (not to mention pre-existing condition abuses)—our republic itself is in danger.  In the regulatory literature, this is called “capture theory.”  The pubic good is captured by concentrated (and vested) business interests. The plight of financial sector regulatory reform in the wake of the financial crisis of 2008 is another case in point.   In short, cleaning up these messes should be easier, even given the encumbering checks and balances in the US Government.  The fact that it is not should give us great pause.

Source: http://www.nytimes.com/2010/03/07/health/policy/07health.html?ref=politics