health insurers

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California Health Care Market

February 9, 2009 in HC Statistics, Health Insurance | No comments

In her California Healthcare Foundation report, Katherine Wilson does a nice job describing the health insurance market in California.  A little over health of individuals received health care from their employer or themselves (56%), a quarter of individuals receive health insurance through public programs, and 19% of Californians are uninsured (see chart). 

The private health insurance market cannot be portrayed as a monopoly nor one that is truly competitive in the neoclassical sense.  A handful of insurance carriers dominate the market.  Kaiser, Blue Cross, HealthNet, Blue Shield, Pacificare, and Aetna control 77% of the market (see chart).  

Of the premiums insurers receive, the percentage of revenues going to medical care varies widely.  Kaiser spends 93% of revenue on medical expenses, but Blue Shield and Pacificare’s traditional insurance plans spend only 70% of revenues on medical expenses.  Administrative expense ratios are also much lower for Kaiser (3.6%) than for providers such as Blue Shield’s tradiational Insurance plan (22.7%). More details about load factors are available here (see chart).

The full CHCF report can be viewed here.

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Docs get free dinners…for prescribing generics?

November 11, 2008 in Health Insurance, Pharmaceuticals | No comments

The pharmaceutical industry is well known for taking doctors (and medical students) out to nice dinners, giving them presents, and doing whatever they can to entice physicians to prescribe their drug.  Now, health insurers are following the pharmaceutical companies lead.

The AP reports that in order to convince physicians to prescribe generic drugs, a Rochester area health insurer invited doctors to “enjoy a free dinner at an elegant Rochester, N.Y., area restaurant specializing in steaks, chops and top-shelf wines, and pocket $100 on the way out the door.”  If the insurance company can convince physicians to prescribe generic drugs, insurance companies figure to save significant amounts of money.  

Other insurers are use more direct measures: cash.  ”Independent Health, a Buffalo, N.Y.-based insurer, offered doctors who prescribe 70 percent or more generic prescriptions in a month a bonus of 50 cents per patient per month. A doctor seeing 500 patients per month who meets the 70 percent minimum can collect $3,000 a year.”

In the long run, this policy may save insurance companies money and drive down premiums.  In the short run, however, physicians may be overly aggressive in convincing patients to take-up generics.  If a patient is currently taking a name-brand drug, switching them to a generic could risk destabilizing their condition.  States such as Massachusetts, Michigan, and New Jersey are contemplating laws which would bar insurers from giving physician cash to prescribe generics.

This goes back to an old story: do we want more choice (name-brands and generics) or lower costs (generics only)?  There is always a tradeoff.

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