Good News/Bad News--
Health Insurance Exchanges May Be Too Small to Succeed - NYTimes.com: " . . . The evidence is mixed, but some of it points to a counterintuitive result: more competition among insurers may lead to higher reimbursements and health care spending, particularly when the provider market – physicians, hospitals, pharmaceuticals and medical device suppliers – is not very competitive. In imperfect health care markets, competition can be counterproductive. The larger an insurer’s share of the market, the more aggressively it can negotiate prices with providers, hospitals and drug manufacturers. Smaller hospitals and provider groups, known as “price takers” by economists, either accept the big insurer’s reimbursement rates or forgo the opportunity to offer competing services. The monopsony power of a single or a few large insurers can thus lead to lower prices. For example, Glenn Melnick and Vivian Wu have shown that hospital prices in markets with the most powerful insurers are 12 percent lower than in more competitive insurance markets. So health insurance exchanges are probably welcome news for hospitals, physicians, and pharmaceutical and medical device companies throughout the United States. If health insurance exchanges divide up the market among many insurers, thereby diluting their power, reimbursement rates may actually increase, which could lead to higher premiums for consumers. . . . . "
