Health insurance in Pennsylvania is more costly on average than almost anywhere in the nation. It is virtually unaffordable for many small employers and individuals seeking insurance on their own.
But in the Lehigh Valley, which has the most competition of any region in the state, the costs for premiums have been going down. The reason: This is the one part of the state where two of the Blues compete along with other health-insurance providers.
The two big Blues that want to merge - Independence Blue Cross of Philadelphia and Highmark Inc. of Pittsburgh - are the largest in the state in terms of enrollment.
Independence and Highmark and have virtual monopolies in their respective coverage areas. As a result, they have been able to bully hospitals and other providers into accepting extremely low payments for service.
On average, the Blues get an 80 percent discount off the price charged by hospitals for their medical services. Other insurance carriers get discounts ranging anywhere from 60 percent to 20 percent - creating a significant disadvantage.
Since the two big Blues are able to extract such huge discounts, neither faces any real competitive threat. They can manipulate their markets, keep price levels high to support high administrative expenses, and not pass savings on to their members through lower rates.
The proposed merger of the two big Blues will only accentuate their monopoly power over a wider market area.
The best way to effectively end this stranglehold and significantly lower the cost of health insurance would be for the state to require hospitals and other health-care providers to charge the same rate for their services to all payers. The rates to be charged would be fixed by each hospital.
