But hospitals and doctors will have to compete on price
Every major insurer has conducted substantial market research into consumers’ attitudes about shopping for coverage. And consistently, what insurers find is that consumers’ highest priority is price. Just as most travelers shop for airline tickets based on price, rather than the brand or the in-flight amenities, most exchange participants will shop on the basis of premiums.
So insurers will compete to offer the lowest price, by contracting with the doctors and hospitals who charge them the lowest fees for treating you. “The networks will be narrower than the networks typically offered to large groups of employees in the commercial market,” said a spokesman for Cigna.
This is, in general, a good thing. Unlike government-imposed price controls, these contracts are voluntary. If doctors don’t like the fees that insurers are talking about, they don’t have to participate. If insurers think doctors are asking too much, they can take their business elsewhere. This is the essence of market-based transactions.
Prestigious but costly academic hospitals will lose business
In particular, this phenomenon means that exchange-based insurance plans will avoid the expensive big-name academic hospitals associated with prestigious medical schools like Harvard. Those hospitals are usually the ones that charge higher prices because they know that they can.
People who really want to keep their doctor, at any price, will often have to pay higher premiums for the privilege. And people who prefer lower premiums, above all, might need to choose a different doctor. But the overall effect of this dynamic will be that hospitals and doctors will have to compete on price, just like people do in every other sector of the economy.
There are a lot of things about Obamacare that will take our health-care system in the wrong direction. But there are a few good things that we should learn from. One of them is that competition works.
