Fewer health insurers dominate markets nationwide, resulting in soaring costs

Less competition among health insurers hits patients' and employers' bottom lines, spurring their costs for healthcare premiums, according to the American Medical Association's newly released edition of Competition in Health Insurance: A Comprehensive Study of U.S. Markets.

The two biggest health insurers dominated in 24 of 43 states, reaching a combined 70 percent or greater market share, according to the study. The high concentration of fewer insurers has rapidly escalated from only 18 of 42 states in last year's report.

"The near total collapse of competitive and dynamic health insurance markets has not helped patients," said J. James Rohack, M.D., AMA president. "As demonstrated by the proposed rate hikes in California and other states, health insurers have not shown greater efficiency and lower healthcare costs. Instead, patient premiums, deductibles and co-payments have soared without an increase in benefits in these increasingly consolidated markets."

Significantly, big cities are being hit the hardest. Ninety-nine percent of urban markets are dominated by a few big health insurers, compared to 94 percent the year before. In more than half of those metropolitan areas, one insurer had a market share of 50 percent or more, compared to 40 percent previously reported in the AMA study.

To remedy the competitive imbalance, the AMA advises the Department of Justice and state agencies to apply antitrust laws against detrimental acquisitions. For example, the DOJ could conduct a retrospective evaluation of health insurance mergers like the Federal Trade Commission performed for hospital mergers.

For the AMA study, 43 states and 313 metropolitan areas were compared to an index used by federal regulators to measure market concentration. The less competitive markets with fewer insurers are more likely to experience higher premiums that adversely affect patients, doctors, employers and the economy.

To learn more about the AMA study:
- read the AMA press release

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