STATEMENT
Of the Honorable Nydia M. Velázquez, Chairwoman
United States House of Representatives, Committee on Small Business
Full Committee Hearing: “Health Insurer Consolidation—the Impact on Small Business”
Thursday, October 25, 2007 at 9:30 am

Access to health insurance is an area of concern to small businesses.  The rising costs of health care are regularly cited by small firms as one of their biggest worries.  Small businesses need to have choices in the health insurance marketplace.  It is imperative that the marketplace is diverse and competition flourishes. 

It is also critical that small medical providers are able to continue offering services.  Physicians and other providers must be able to operate on a level playing field with health insurers and be reimbursed at fair rates.  If not, quality of care will decline and it is the patients who ultimately will suffer.

Consolidation in the health insurance industry is one area of special concern that has a direct impact on these issues.  Because these mergers affect access to care and influence the quality of medical services, they command careful scrutiny by regulators.

Unfortunately, the health insurance industry, like a number of other industries, has seen a general lack of enforcement of antitrust laws.  Earlier this year, the Wall Street Journal reported that “the federal government has nearly stepped out of the antitrust enforcement business.”

While some mergers benefit consumers and increase the competitiveness of U.S. companies, others pose substantial risks to competition and innovation.

The health insurance marketplace has become increasingly concentrated in recent years.  Consolidation has left small businesses with fewer choices and physicians with diminished leverage to negotiate with plans.  In the majority of metropolitan areas, a single insurer now dominates the marketplace.  If individuals and small businesses cannot get coverage through the dominant insurer, they may not be able to find alternatives.   

 

Recent mergers in the health insurance industry have tended to not generate efficiencies that have lowered costs for small businesses or improved coverage.  Premiums for small businesses have continued to increase without a corresponding increase in benefits.  Consumers are facing increased deductibles, co-payments and co-insurance which have reduced the scope of their coverage.

When operating in highly concentrated markets, physicians often find they are stuck with take it or leave it contracts.  The Department of Justice has recognized that physicians face special difficulties in dealing with health insurers—namely, it is very costly for them to switch from one insurer to another. 

Replacing lost business for a physician by attracting new patients from other sources is very difficult in our current health care system.  Physicians face barriers in attracting potential new HMO patients since they are filtered through an HMO plan.

Physicians struggle to maintain the quality of care in the face of reduced reimbursements and large administrative burdens.  When physicians are forced to spend less time on each appointment, ultimately, it is patients that suffer.

It is essential that competition remains vibrant in the health insurance marketplace.  Not surprisingly, studies have found that when competition declines, premium costs generally go up.
The rising costs of healthcare are leading to greater numbers of uninsured as less small businesses and individuals can afford to pay premiums.

Small businesses continue to be burdened by the high costs of health care.  The rising cost of health insurance is one of the primary reasons the ranks of the 46 million uninsured Americans continue to grow.  Tragically 18,000 Americans lose their lives each year because of a lack of health insurance. 

We need to ensure that providers are on a level playing field, and small businesses and individuals have choices when it comes to healthcare.