The Effect of Physician-Controlled Health Insurance

Abstract

The trial record in an antitrust case against the Oregon State Medical Society, finally decided in 1952, was examined to reconstruct the behavior of a competitive market for health insurance coverage. Health insurers, called "hospital associations," were found to have engaged individually in cost-control efforts similar to, but possibly more aggressive than, today's utilization review under professional sponsorship. The subsequent disappearance of these insurer-initiated cost controls in Oregon is traced to the medical society's organization of a competing Blue Shield plan as a model of insurer conduct and to a simultaneous boycott by physicians of the hospital associations as long as they persisted in questioning doctors' practices. Some modern parallels are noted, and the advantages of fostering privately sponsored cost-control efforts are suggested.