Little Competition May be Reason for High Rates
With only two health insurance companies, Blue Cross and Blue Shield and Coventry, offering plans through North Carolina’s health care exchange, the prices of health care plans are higher in some places than the national average. The prices of plans offered through the exchange vary greatly by area, but many areas in North Carolina, especially rural areas, are seeing higher rates. Differences in costs for medical care could be contributing to these variations. Prices for doctors and hospitals vary, as does the number of hospitals and doctors in a specific area. There are many variables that contribute to some areas having higher rates, but a major reason may be the lack of competition.
Blue Cross and Blue Shield almost has a monopoly on health care in North Carolina, and is the only carrier offering plans in all of the state’s 100 counties. It’s only competition is Coventry Care of North Carolina, however Coventry is only offering plans in 39 counties, leaving BCBS as the only provider in 61 counties. Several counties only have one available plan, and the prices in these areas are higher than those places where there are more plans offered. It could be argued that companies know which areas have more expensive medical care, and so they avoid those areas, but it has been observed in other areas and states with more competition that this helps to keep the rates down.
Despite the current lack of competition, other companies could end up entering North Carolina’s market. If the exchange appears successful to insurance companies, some may want to get involved to share this success. If more options are introduced into North Carolina’s exchange, this could help to create competition between companies, resulting in lower rates. However, it may prove difficult for new companies to get contracts for health services in order to enter the market.
Posted on October 10, 2013, in Health Care. Bookmark the permalink. 2 Comments.
ncpoliticalissues 
Do you think the lack of competition could be credited to the newness of the Affordable Care Act? Since the new health care initiative is so controversial, I feel like companies may be purposely staying out of the online marketplace because they do not know how it will be publicly received, or how successful it will actually be.
You noted that prices may differ between rural and urban areas. Do you think that is fair? The goal of the Affordable Healthcare Act is to provide attainable health coverage for everyone, no matter their geographical location. Therefore, I do not understand how these online marketplaces can justify fluctuating prices depending on location.I am not very versed in the logistics of the Affordable Health Care Act, but can the government intervene with these online marketplaces if they are are not being fair with their pricing?
I don’t think the lack of competition is because of the “newness” of the ACA for two reasons: first, the ACA was passed back in 2010, so it’s not exactly new, it’s just that we’re just starting to see some of its main components (the exchanges); and second, other states have more providers in their exchanges, so I wouldn’t blame lack of competition on the act itself because I think if it was responsible, then it would have this effect nationally and not just in North Carolina. If anything, the lack of competition may be due to North Carolina choosing not to run the exchange. If the state at least had some control in the exchange, I think more companies would have tried to get involved because the state better knows what its people need than the federal government, and so companies might think the exchange would be more effective.
I think the price variance based on location is tricky. It doesn’t seem fair that rural areas would have higher rates and less options, especially because rural areas probably have a lot of people without insurance that would use the exchange. However, I can understand why the prices are higher, because if medical care itself is more expensive in an area (because of the lack of competition between doctors and hospitals) then the insurance would also have to be higher in order to cover those costs.
The government has to approve the plans offered in the exchange. So the government can intervene, but they would do so before the plans were even placed on the exchange. The prices that appear on the exchanges will have already been approved by the government.