Report: Scarce competition among insurers

Most insurance companies face little to no competition, as many states have insurance markets that are dominated by just one or two health companies, according to a new report from the Kaiser Family Foundation.

Alabama is the least competitive health insurance market in the country, where Blue Cross Blue Shield of Alabama sells 86 per­cent of all individual policies and 96 percent of small group policies, reports the Montgomery Advertiser.

The most competitive individual insurance market in the country is in Wisconsin, where six companies have more than 5 percent of the market for individual insurance, with the largest company having a 21 percent market share.

By comparison, in five states--including Iowa and North Carolina--one insurer has more than 80 percent of the market. In another seven states--including New Jersey, Massachusetts, and Arkansas--one company has more than 70 percent of the market, and in 11 states, only two insurers have more than 5 percent of the market, reports the Milwaukee Journal Sentinel.

For the small group market, four insurers in Wisconsin have more than 5 percent of the market, the largest of which has a 36 percent market share, the Journal Sentinel notes. Only Oregon and Pennsylvania had more competitive markets. In four states, including Mississippi and Louisiana, one company had more than 80 percent of the market. And in another five states, including Maryland and Tennessee, one insurer had more than 70 percent of the market.

The report suggested that the wide variation in market concentration could be caused by popu­lation density and differences in regulations, notes the Advertiser. "If it's a more rural state, it's just harder to have multiple plans competing side by side and differentiating them­selves," said Larry Levitt, Kaiser's sen­ior vice president and co-au­thor of the report. "More rural states are going to tend to have less competition, both in med­ical care service, and among insurers."

Blue Cross Blue Shield of Alabama spokeswom­an Koko Mackin said the findings reflected the company's com­mitment to its customers. "We've really worked hard to earn customers' trust, and we've worked hard to earn this market share," she told the Advertiser. "If we don't deliver excellent custom­er service and meet the needs of our customers, things could change."

However, Blue Cross and other dominate insurers might see their market concentration dwindle after health insurance exchanges allow for additional com­petition from outside each state. "There will be an opportuni­ty for national plans to be of­fered in the exchange, so it has the potential to open markets that don't have competition," Levitt said.

To learn more:
- read the Kaiser report (.pdf)
- read the Montgomery Advertiser article
- see the Milwaukee Journal Sentinel article