Why Not With Health Insurance?

Via Hit and Run comes a story of Chinese customers engaging in "team buying":

Last month, Fiona Li did what millions of Chinese shoppers do to find a bargain: she went online.

A few clicks later, she had a lead on where to buy the consumer goodies her brother wanted for his new apartment. Instead of reaching for her credit card, though, she jotted down a time and a place: 8 p.m. at a downtown electronics store.

That evening, Ms. Li and her brother joined 15 strangers at the store to demand a group discount on a new television, refrigerator, and washing machine. Salespeople grumbled at the tactic, but the group refused to buckle. After two hours of haggling, and several walkouts by group members, the store manager agreed to a 10 percent markdown on the three items.

One of the arguments used against the idea of decoupling insurance from employment or in favor of the US government negotiating prices with drug companies like other governments do is that pooling buyers makes things cheaper. My reaction has always been, "You can still do that without the government." There's nothing stopping people from getting together and trying to buy things in bulk. That's basically what a union does: negotiate terms of employment in bulk. There's no reason why "team buying" can't happen in healthcare without the government's help.

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There is one reason: there

There is one reason: there isn't typically any open pricing in health care. Hearing a speech by Newt Gingrich recently, it seems that Florida's government has forced open pricing in pharmaceuticals, and that it has been extremely helpful in reducing prices.

Now, I'd much prefer if such things weren't mandated by the state, but with our current mix of obscene government regulation and the illusion of a free market in health care, I don't know of another way to bring about open pricing.

In many contexts, there is

In many contexts, there is legislation specifically to prevent such citizen-driven grouping.

Try it with 20 coworkers on your employer, and see how fast you run afoul of a trade union monopoly on collective bargaining. Try it with 20 companies on a supplier or customer and have a nice chat with the feds about illegal price-fixing. So, too, with health care. Once you get to a size that's big enough to have any power, some attorney general or state insurance commissioner is going to smack you with a massive beaurocracy of anticompetitive regulations.

It doesn't take the government's help per se, but it does take the government's permission. (Note that I say "does", not "should".)

I am a member of a

I am a member of a professional association that offers a number of benefits to members. Some of them are part of the basic membership, but they are a very nice discounted bundle if your have a use for them. They also offer a fairly good group rate on life insurance. That's nice if you are either self-employed, or like me have worked for several years for a series of employers while seeking learning opportunities and greater responsibility.

Jonathan: That's basically

Jonathan: That's basically what a union does: negotiate terms of employment in bulk. There's no reason why "team buying" can't happen in healthcare without the government's help.

In point of fact, mutual aid societies in the U.S. and the U.K. were doing exactly that around the turn of the 20th century, through the institution of "lodge practices." Care from a G.P. under a lodge practice contract typically cost about one day's wage per worker per year.

Until the government and the government-backed doctors' guild destroyed them, that is.

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There really shouldn't be

There really shouldn't be any reason why a group of 10,000 random people should not be able to go to Anthem or Aetna and say, "we want the same price for health insurance that Ford or GE or whoever gets with their thousands of employees."

It might make a good class action suit.

If the electronic store

If the electronic store refused to buckle there would be no harm to the consumers - they just wouldn't get the toys they wanted. Should the pharmacy stand fast and the consumers walk they wouldn't have their meds - they stay sick, probably get worse and, in some cases, die. Also a 10% on drug prices is a big "so what". Assuming you could round up enough people for some cancer drugs you would only have to pay $90,000 instead of $100,000.

It seems to me that in the

It seems to me that in the case of insurance, you still run into the same problems with a group of people as you do with individuals buying health insurance. Say I band together with a group of people, the health insurance companies are going to want to know why we've all banded together. Are we a group that's particularly at risk for one kind of disease or another?

And what group of people banding together should I join? I want the lowest price, so I want a group that is mostly comprised of low risk people. In fact, the ideal group for me to join is the one where I am the most at risk of everyone in the group of suffering from some expensive malady. And that's true of everyone as they try to find a group that will negotiate the best price. So what now? Do health groups have to screen people who might join them to make sure you aren't accidentally letting in a team of future cancer victimes that will drive your group's premiums up? The problem of one sided information that plagues individuals buying health insurance hasn't gone away, it's just shifted to a new group to deal with.

A group of people banding together for the express purpose of buying health insurance is different in important ways from a group of people banding together to buy TVs and also different in important ways from a group of people who came together essentially at random for a different reason (making cars) who are then forced to buy health insurance as a group as part of their benefits package.

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