Opinion Columns & Blogs

Insurers, big banks don't want free market

As everybody knows, the two biggest battles on Capitol Hill — reforming health care and regulating Wall Street — have unleashed massive campaigns from the enemies of free markets.

The Obama administration and congressional liberals, right? Guess again.

Health insurers and big banks are fighting against having their products displayed on open markets, where buyers might be able to find better (and more comprehensible) deals, or are resisting reforms that would open those markets to more competition.

Neither the health care industry nor Wall Street banking is a notably competitive sector these days. Indeed, both are becoming less competitive. And they want to keep things that way.

In more than 30 states, five or fewer health insurance companies control three-quarters of the market (in Alabama, one company controls 90 percent). And mergers among health insurers are at an all-time high this year, the Wall Street Journal reported Tuesday. Worse, more and more businesses are declining to offer health insurance to employees (60 percent offered benefits this year, down from 69 percent in 2000 and 63 percent last year, according to an annual Kaiser Family Foundation study). Increasingly, individuals will have to shop for insurance in markets that are steadily less competitive.

President Obama and congressional liberals believe that one way to help Americans get the best deal for health coverage is to establish insurance exchanges where consumers can compare plans online. They further believe that merely establishing an exchange in an oligopolistic market isn't enough; the way to ensure true competition is to create a public option concerned less with preserving an industrywide profit margin than with offering Americans a better deal.

Over the past two weeks, one major poll after another has shown that the public supports the public option by a wide margin. Does that mean that three out of five Americans, Barack Obama and most congressional Democrats are really closet socialists? Probably not. It means that they support consumer choice, informed shopping and genuine competition in the health care sector. The leading opponent of which is our health insurance industry, which does just fine without them.

A similar dynamic characterizes congressional efforts to regulate Wall Street. Last week the House Financial Services Committee took up the question of regulating derivatives. It crafted a bill that would enable the five banks with 95 percent of all U.S.-bank derivative holdings (J.P. Morgan Chase, Goldman Sachs, Bank of America, Morgan Stanley and Citigroup) to keep much of their business off the exchange the Obama administration proposed establishing so that investors buying derivatives could compare the prices and risks of the offerings and regulators could know when these deals threatened to topple the economy (as they did last year). By keeping these products off an exchange, the banks can (and do) collect considerable fees every time they sell such offerings — fees that would decline if deals closed on a competitive exchange.

So who's for competition and open exchanges? Who's for markets, instead of opaque products sold behind closed doors? Not big business, at least in the health care and finance sectors. They've got few competitors and they sell products for which consumers can't easily discern whether they're paying a fair price. Why muck with that?