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“Our Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain except death and taxes.”- Benjamin Franklin 1789Had our founding father been alive today, he would most certainly would have added a third permanent certainty: “the increasing costs of healthcare premiums.”We once lived in a world where monopolies were reviled and the government was quite aggressive in dismantling these entities because of their exploitative ambition. I would posit that the Number One reason that healthcare rates have increased is a function of the HUGE monopolies that have been allowed to exist and grow in the Massachusetts healthcare marketplace. This phenomenon has been allowed to exist in other states as well.As an Employee Benefits Consultant for over thirty years in the Boston market, I have an excellent understanding of how the healthcare system works in this State. I do not think that Massachusetts is unique in the US and in most large metropolitan cities, hospital groups have been allowed to significantly scale in size, creating the foundation of mini-monopolies. In Massachusetts, Partners Healthcare is the single largest employer in the State. It has become our healthcare's "too big to fail" firm and yields a tremendous level of influence on local policy and legislation. Partners employs the very best lobbyists, lawyers, deal makers, and special interest groups that bear considerable clout on Beacon Hill - where ALL State legislation is spawned, endorsed, or crushed.Shortly after the merger of Massachusetts General and Brigham & Women’s in 1992, which created the largest Hospital Group in Massachusetts, an opportunistic, William van Fassen, the CEO of BCBS, the largest Insurance Provider in Massachusetts met privately with then CEO of Partners, Samuel O. Their. This now infamous meeting has been referred to as the “secret hand-shake” meeting. At this meeting, a mutually beneficial agreement between two industry titans was forged. This agreement was a “bell-weather” moment for rising healthcare costs in Massachusetts. It marked the collusion of two giants that would produce otherworldly financial results for both entities. In the intervening years since this ‘Agreement” between two of the largest players in their respective markets preyed upon the consumers of healthcare in Massachusetts.In the decade after this “Agreement”, Partners went on to become Massachusetts’ largest private employer; increasing its size through rapid Hospital acquisition and more than doubling its patient volume; increasing its overall revenue by 400%; and reporting $2.2B in total income in just 2012 alone. For Blue Cross and Blue Shield of MA., this “Agreement” enabled their profits to soar from $82.7M in 2001 to more than $200M in each of the subsequent six years. As of January 1, 2013, BCBS grew to become the largest HMO in the state and is larger than the next four largest HMO’s combined.Mutually beneficial financial relationships between significant players like the Partners and BCBS “Agreement” were being spawning all over the country in the late nineties and early ought’s. As these relationships grew, so too did their leverage to dictate overall pricing. They became so large that eventually the tail began to wag the dog. The Insurance Providers lost their reimbursement negotiating power to these mega-Hospitals and as a result these mega-Hospitals had completely turned the tables on the Insurance Providers. No longer were these meetings between the Insurance Provider and meg-Hospital a negotiation, rather they became a one-sided dictation by the mega-Hospitals on what they would accept for reimbursements. As you might imagine, these mega-Hospitals demanded and received significantly higher reimbursements than they had previously accepted. The Insurance Providers were forced to accept these terms because they could not offer a product that did not include these mega-Hospitals. Because mega-Hospitals were allowed to grow unabated, the Insurance Providers were backed into a corner and had no other choice but to increase the rates they charged their clients to account for these higher reimbursement demands.Increased reimbursement demands grew as mega-Hospitals like Partners grew. Partners eventually acquired 16 major hospitals, including Nantucket’s Cottage Hospital and Martha’s Vineyard’s Martha’s Vineyard Hospital. These two hospitals were strategically purchased as they were geographically desirable as they were the only hospitals on each of these respective islands. Absent of any competition, Partners was able to once again able to dictate to the Insurance Providers what they would accept for reimbursements.As Partners and others were involved in the “Empire Building” process, they were doing this on the backs of healthcare consumers and the businesses that were forced to pay their artificially high reimbursement levels. Eventually as these forces spread throughout the country, these increasingly meteoric costs began to garner national attention and many constituents looked to their political leaders for help. After substantial hue and cry, the federal government eventually stepped in. As with most governmental programs, they were highly influenced by the high priced lobbyists, lawyers, and deal-makers that represented these mega-Hospitals. By carefully managing the reason for these escalating costs, they easily convinced the legislature that the spiraling healthcare costs were the result of too many “uninsured” people that were receiving free care and stressing the system. The solution was based on an extremely flawed and biased narrative that was essentially based on theory, rather than factual content. The Patient Protection and Affordable Care Act ( PPACA ) was successfully inked into law in 2013. This much ballyhooed piece of legislation successfully misdiagnosed the real reason for soaring healthcare costs and ironically provided more opportunities for these mega-Hospitals to continue to fleece America. The PPACA was really a “participation” mandate and its principle objective was increasing the number of insured Americans. There were no cost-containment provisions contained in the PPACA.The PPACA was exactly what the mega-Hospitals desired as the passage of this law increased patient volume as more and more people were forced to buy insurance and to finally get the care they might have delayed or had been prevented from receiving due to pre-existing conditions. However, the PPACA needed someone other than the tax-payer to fund this ambitious new law and they turned to the Insurance Providers to help fund this legislation. The Insurance Providers had been held in abeyance as critical components of the PPACA were passed. While many Insurance Providers saw the writing on the wall, they simply did not have the “juice” to compete with a well-organized conglomerate of mega-Hospitals. Most Insurance Providers are regional players and could not mobilize the national clout required to compete with this coalition of mega-Hospitals. Their failure to coalesce as a formidable group in many key components of the PPACA would spell doom for many of these Insurance Providers.The PPACA required the government to get into the insurance business. The PPACA needed someone to help fund this legislation and conveniently inserted themselves into the insurance market. As the Insurance Providers suddenly found themselves in partnership with the federal government, they quickly recognized this new federal regulation would fundamentally change everything. The government required a universal healthcare plan design; the elimination of pre-existing conditions; and increasing internal limits: all provisions that once allowed these Insurance Providers to subsist in a highly competitive market. The government also forced the Insurance Providers into accepting a “One Way” contract that mandated specific limits on the amount of profit they could make on any one employer and then eliminated their claim safety net. By forcing the Insurance Providers to get more granular with their clients, they eliminated many of the essential tools that the Insurance Providers used to control risk and make money. Risk pooling was a very important actuarial tool utilized by every Insurance Provider to more effectively and efficiently manage the small employer group market. However, since the government imposed specific profit limits that focused on individual employer groups; they effectively took this integral tool away from the Insurance Providers. Finally, the government required the Insurance Providers to file their rates and plan designs with the state to control costs. The PPACA essentially rocked the world of the Insurance Provider, while leaving the real culprits, the mega-Hospitals unscathed.These Insurance Providers who were instrumental in the initial growth of these mega-Hospitals during their “Empire Building” stages, where suddenly the “odd man out” after the dust settled from the passage of the PPACA. Many of these Insurance Providers recognized that having the government dictating their rates and plan designs lead to significant losses. As the hemorrhaging continued, many saw the writing on the wall and simply existed their respective markets. Others Insurance Providers struggled to work within the confines of governmental regulation and initiated cost saving strategies. Often these strategies shifted the Insurance Provider risk onto the patient. In addition to significant increases in premiums, the Insurance Providers also rolled out plan designs with high deductibles. The inference being that the patient was somehow liable for increased cost of healthcare. These high deductible plans made patients who needed care think twice about the economic impact of submitting a claim versus the risk of not receiving care.While the Insurance Providers continue to dilute plan designs and increase premiums to offer viable products, the mega-Hospitals continue to thrive. In fact, many of these facilities have never been busier and more profitable. The PPACA gave them a fresh injection of newly insured patients. Meanwhile, the Insurance Providers have become toothless and are forced to wield a knife to a gun fight. They are in a no-win situation and absent of breaking up these mega-Hospital monopolies, there is simply no end in sight for Insurance Provider and patient alike.The Elephant in the room are these mega-Hospitals and the power they yield in the marketplace. They are the primary culprit in this brave new world of escalating healthcare premiums and the weakening of healthcare plan designs. While brokers like myself are forced to sell high deductible plans and HSA programs, these plans are merely "band-aids" to the much larger problem of hospital monopolies.