So, tell me again how this competition among health insurers works?

2013

Read below what I have placed in bold. Now recall all you have heard about increasing competition among insurance companies lowering health care premiums. The more competition you introduce in an area, the less ability each competitor has to negotiate the best prices.

Excerpt from a recent Wall Street Journal article:

Insurers with only a small presence in a state’s individual market may not wish to maintain it amid the shifts tied to the law—though rather than withdrawing completely, some might simply tone down their marketing and other efforts to win new business. “It’s the effect of the change,” which creates uncertainty for carriers, said Raj Bal, a former insurance-industry executive who is now a consultant.

The health law is expected to expand the individual insurance business, but the new coverage rules will also mean major changes. Also, in the new exchanges, consumers are expected to focus closely on costs, particularly monthly premiums. Insurers may find it tough to compete if they don’t have scale in a particular market, partly because they can’t match the prices that competitors win from health-care providers.

When you hear claims about competition among insurers in the new health insurance exchanges lowering premiums, you might want to ask exactly how that works.