Could Health Insurers Become Too Big To Fail?

Published on
April 23, 2009

In a provocative April 9 post, Dr. Jaan Sidorov, who writes the Disease Management Care Blog, envisions how federal health reforms could prompt health insurers to consolidate to the point where, like AIG, they are "too big to fail."

What a horrifying scenario. "The last thing we need is one or more AIG-like health insurance entities with a critical mass of beneficiaries and providers vulnerable to unpaid bills," Sidorov writes.

Sidorov, a primary care physician and disease management expert formerly with the Geisinger Health Plan, suggests that some of the features we're likely to see in any federal health reform - community rating, guaranteed issue and competition with federally-funded public health insurance could force small insurers out of business.

The larger insurers left standing could grow even bigger as they seek ever-greater economies of scale and access to capital, Sidorov cautions. While health insurers are stringently regulated by states, federal health reform could prompt insurers to ask for federal-only regulations to standardize their offerings across the country, leading to less oversight.

Having covered a failed insurer's toll on thousands of patients in California, I was disconcerted by the idea of health insurers being too big to fail. If taxpayers someday have to bail out these insurers like banks, wouldn't we then have a nationalized health system for real?