Featured Health Business Daily Story, Nov. 10, 2011

Blues Plans Dominate Market In Nearly Every State, AMA Says

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry.

By Steve Davis, Managing Editor
October 31, 2011Volume 21Issue 38

Four out of five metro areas lack a competitive commercial health insurance market, according to an analysis released Oct. 25 by the American Medical Association. And markets could become even more concentrated as large insurers gobble up smaller ones to gain scale in order to offset increased costs tied to the reform law (see story, p. 1). Although some critics blame insurer market concentration for premium hikes, others point to provider consolidation as a key driver in coverage costs. The trade group America’s Health Insurance Plans (AHIP) contends that the AMA data are flawed.

According to AMA’s analysis, nonprofit and for-profit Blue Cross and Blue Shield plans dominate the managed care market in all but seven states — Arizona, California, Colorado, Nevada, New Jersey, Utah and Wyoming. And in all but one of those states, a Blues plan is the second largest carrier. Wyoming’s insurance landscape is controlled by Cigna Corp. (45%) and UnitedHealthcare (21%).

The report, which measures market concentration in 47 states and the District of Columbia, determined there is a “significant absence” of competition among health insurers in 83% of those markets. And in about half of those markets, at least one health insurer had a commercial market share of 50%. Montana, North Dakota and Wisconsin were not included in the data.

In Alabama, the state’s second largest carrier, UnitedHealthcare, has just 5% of the market. The state’s Blues plan has 90%. Alabama was cited as the nation’s least competitive state for health insurance. The report concludes that there “have been no observed benefits” of market consolidation and warns that too much market power by an insurer “is detrimental to society.”

Exchanges, CO-OPs May Spark Competition

Some industry observers contend tax credits for low-income individuals and small businesses called for by the reform law will translate to millions of new members, which could lure new competitors to some markets. Moreover, the reform law calls for the development of retail-focused state insurance exchanges as well as Consumer Operated and Oriented Plans (CO-OPs).

In Mississippi, the state Blues plan controls 55% of the overall managed care market, while UnitedHealth has 23%, according to AMA’s data. The state’s insurance department, however, is optimistic that its insurance exchange will help it add a few more players to the mix.

“We hope [the exchange] will be a competitive marketplace and will attract competitors….We can’t be certain of that, but that is the goal,” says Aaron Sisk, the department’s senior staff attorney. “We have such a skewed competitive marketplace right now. We have so little competition…that we can only benefit from more competitors.”

Health insurers argue that they need scale to keep coverage costs from spiking as health systems consolidate and dominate markets (HPW 9/10/11, p. 1). “Consumers in every market have numerous choices among plan types and insurers,” says AHIP spokesperson Robert Zirkelbach. “Moreover, research examining competition in health care markets increasingly points to provider consolidation as a significant factor driving up health care costs for families and employers.”

He tells HPW that AHIP this year submitted a report on health plan mergers to the Dept. of Justice and the Federal Trade Commission that called into question data previously released by the AMA. The paper, “Federal Health Plan Merger Enforcement Is Consistent and Robust,” was written by Cory Capps, Ph.D., of Bates White, LLC, a former staff economist at the antitrust division of the Department of Justice. Bates, according to Zirkelbach, determined that data used by the AMA on health plan concentration was “plagued by a number of significant limitations” and “fail basic checks of accuracy and reliability.”

AHIP also released a study on the consolidation of hospitals in June.

For more information about AMA’s report: Competition in Health Insurance: A Comprehensive Study of U.S. Markets, visit www.ama-assn.org. To see AHIP’s report, Market Concentration of Hospitals, visit http://tinyurl.com/3egwra9.


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