Four of Five Metropolitan Markets Lack Competition in Health Insurance, AMA Says

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By Sara Hansard

Four out of five metropolitan areas in the United States lack a competitive commercial health insurance market, according to an annual survey by the American Medical Association issued Oct. 25.

The 2011 edition of Competition in Health Insurance: A Comprehensive Study of U.S. Markets found a “significant absence of health insurer competition exists in 83 percent of metropolitan markets.” Those markets are rated “highly concentrated,” based on newly revised Horizontal Merger Guidelines issued in 2010 by the Department of Justice and the Federal Trade Commission, the AMA said in a release.

In about half of the metropolitan markets, at least one commercial health insurer had a market share of 50 percent or more, according to the AMA, which represents about 250,000 doctors and medical students.

In 24 of the 48 states covered in the study, the two largest commercial health insurers had a combined market share of 70 percent or more, it said.

The least competitive health insurance markets were in Alabama, Alaska, Delaware, Michigan, Hawaii, the District of Columbia, Nebraska, North Carolina, Indiana, and Maine, the study said.

The report “demonstrates the degree of anti-competitive market clout that some health insurers have gained through mergers and acquisitions,” AMA President Peter Carmel said in the statement. The report is intended to help policymakers identify markets where mergers among health insurers may cause competitive harm.

AHIP Says Insurer Competition ‘Vigorous.’

America's Health Insurance Plans, which represents about 1,300 health insurers covering about 200 million people, disputed the AMA's findings. “Competition is vigorous among health plans across the country,” AHIP spokesman Robert Zirkelbach told BNA in an e-mail.

“They operate in highly competitive markets in which consumers have numerous choices among plan types and insurers,” Zirkelbach said. “Moreover, research examining competition in health care markets increasingly points to provider consolidation as a significant factor contributing to rising health care costs.”

Both the FTC and DOJ have looked at the issue and determined that health plans operate in highly competitive markets, according to AHIP. “A state is not always the most appropriate market to look at,” AHIP said. Large employers purchase coverage on a national market, while others buy coverage statewide or in their local community, it said.

“Concentration is not the same thing as competition,” AHIP said. “Just because one plan has a large market share does not mean that consumers do not have choice of plans.”

Some insurers may have a large market share, AHIP said, because:

  • they have been in operation a long time,
  • they offer the most affordable options, or
  • they have the highest satisfaction rates.

AHIP also said its research has found that “states that are often cited as examples of the high market concentration actually have some of the lowest premiums in the nation.” In addition, “While there is no evidence that health plan concentration drives up costs, there is evidence that provider consolidation has caused an increase in health care costs,” it said, pointing to its own analysis of provider consolidation, Market Concentration of Hospitals.

The AMA has published a survey of the competitiveness of the commercial health insurance market since 2001, AMA spokesman Robert Mills told BNA.

Information on purchasing the AMA report is available at AHIP's report, Market Concentration of Hospitals, is at