But just because so many of us are convinced we need health insurance sold by an insurance company, and just because that’s the way the politicians think of things, what’s to stop another industry from offering the same protections more conveniently or maybe even at lower prices?
Nothing it seems. In fact, hospitals, which provide the lion’s share of America’s health care, have already started to sell health insurance plans. Obamacare’s private exchanges made that easier to do logistically, but the biggest impetus is the fact that hospitals have been consolidating and increasing their reach over every aspect of health care from acquiring private practice doctors’ offices to operating nursing homes and rehab centers.
It’s a simple case of an industry that provides every health care service deciding to cut out the middle man.
The financial results for many of the hospitals that started offering insurance plans since 2010 have been a mixed bag. Certainly, they’re not as strong as the stellar profits traditional health insurance companies have enjoyed in that time. But one major hospital system CEO, Michael Dowling of Northwell Health in New York state, says this new business plan is a “long term play.”
He and his peers may not have to wait too long if Obamacare’s generous direct and indirect subsidies are cut by the Trump administration or some kind of Congressional reform of the ACA. And with several insurance companies deciding to exit Obamacare exchanges even with those subsidies in place, the hospital industry may soon find itself playing in a much less crowded field.
Hospitals could also simply start to offer customers significant discounts for using their plans or perhaps even stop accepting certain competitor insurance plans altogether. It all depends on how ruthless they want to be, but no one can deny they have the power to do it. After all, they control the actual product customers ultimately want: health care. And health care and health insurance are two different things.
But it would be naive not to consider one factor that could keep the status quo in place for a longer time. That would be the fact that insurance companies and hospitals have a symbiotic relationship that helps perpetuate the hospitals’ ability to control prices and the insurance companies’ ability to convince almost everyone in America that they need their product.
It works something like this: Hospitals continue to have the most leverage when it comes to setting and raising prices for all kinds of care. But the insurance industry helps mitigate the potentially disastrous response to hospital price increases because people who have insurance don’t pay full price.
In fact, most of us don’t know the actual price of any treatment at the hospital. Imagine running an industry that has the power to raise prices without having to deal with public outrage when those prices are raised because its prices aren’t published.
That’s the advantage most hospitals have in no small part thanks to the insurance industry. You may know what you’re paying in monthly premiums or what comes out of your paycheck to pay for health insurance. But you have to wait until you get medical treatment and then get an itemized statement from your insurer to find out what the list price of that treatment was.
The insurance industry gets its justification to exist by selling the idea that only it can help make those mysterious health care costs affordable. So when hospitals raise prices, it’s very good news for them and the insurers who serve their patients.
But again, the implosion of Obamacare in so many parts of the country is already putting the private insurance industry in jeopardy. When and if the bean counters figure out a way that hospitals can do better without the private insurers around, it’s hard to see why they wouldn’t simply sweep them away faster than Amazon put an end to your local book store.
Commentary by Jake Novak, CNBC.com senior columnist. Follow him on Twitter @jakejakeny.
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