Mergers Among Health Insurers Limiting Consumers' Choice of Care, Providers

Apr 18 2006 - 8:12pm
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Health Insurance Providers and Consumers

Consolidation among health insurers has led to near-monopolies and oligarchies in most regions of the U.S., according to an American Medical Association study released on Monday, Dow Jones/Baltimore Sun reports. The study used the Department of Justice system called the Herfindahl-Hirschman Index, which measures antitrust concerns. A score above 1,000 on the index shows "moderate" market concentration and a score above 1,800 shows "high" market concentration.

According to the study, which is based on 2005 data, 56% of 294 metropolitan areas studied have single insurers that control more than 50% of business in HMO and PPO underwriting. The study finds that, based on the index, 95% of the metropolitan areas scored higher than 1,800. Sixty-seven percent of metropolitan areas scored above 3,000. In addition, each of 43 states studied was measured as having a "high" market concentration. North Dakota was among the states with the highest market concentrations, with about 90% of its market controlled by the state's Blue Cross Blue Shield provider (Dow Jones/Baltimore Sun, 4/18). Blue Cross Blue Shield of Alabama controlled more than 90% of the market in parts of Alabama (Colliver, San Francisco Chronicle, 4/18).

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AMA said there have been more than 400 health care insurance mergers during the past decade. Health insurers following consolidations have "presumably eliminated duplicative functions [but] they're not passing the savings in personnel and administrative costs on to consumers," Dow Jones/Sun reports. Rate increases are slowing, but they "are higher than ever and growing at a near double-digit pace," Dow Jones/Sun reports. AMA said it raised antitrust issues with DOJ, which it said did not express interest in pursing the matter, Dow Jones/Sun reports (Dow Jones/Baltimore Sun, 4/18).

Reaction from health insurance industry

James Rohack, immediate past president of AMA's board of trustees, said, "Each time we've seen consolidation, premiums have gone up, and choice has gone down" (San Francisco Chronicle, 4/18). David Colby, CFO of WellPoint, said, "Our premiums are pretty much tracking what medical costs are doing." Colby said rising medical costs have forced WellPoint to raise premiums, adding that the percentage of costs the company spends on medical care has remained constant in recent years (Dow Jones/Baltimore Sun, 4/18). Christopher Ohman, CEO of the California Association of Health Plans, said, "Health care premiums are up because the underlying costs of health care are up dramatically. The causality is not consolidation." Gary Claxton, a vice president at the Kaiser Family Foundation, said that rising medical costs are a significant reason for increased health insurance costs, and thus higher insurance premiums, but he added that large hospital networks and complex contracting arrangements with insurers made it difficult for new insurers to enter the market (San Francisco Chronicle, 4/18).

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