Monday, October 18, 2010

How do insurance companies soften competition?

By raising rivals' costs.  The Department of Justice (my former employer) sued Blue Cross, saying that their "most favored nation" raise the costs of rivals and allow Blue Cross to charge higher prices to consumers.:
Some of these contract provisions, known as “most favored nation” clauses, require hospitals to charge other insurers a specified percentage more than they charge Blue Cross — in some cases, 30 percent to 40 percent more.
Blue Cross says that these discounts lower the prices that they charge their own consumers.


  1. So medical insurance became an externality?

  2. Funny that BCBS controls huge marketshares in the states they operate in... It would be extraordinarily difficult to practice medicine in the state of GA and refuse BCBS. Also, remember, the "member" is not BCBS's customer, their employer is... What a super-duper medical payment system we have...