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February 23, 2010 Tuesday 8:20 PM EST
SECTION: NEWS & COMMENTARY; Healthcare
LENGTH: 554 words
HEADLINE: Insurers’ market power growing, study finds
BYLINE: Russ Britt, MarketWatch mailto:firstname.lastname@example.org.
Russ Britt is the Los Angeles bureau chief for MarketWatch.
LOS ANGELES (MarketWatch) — Amid growing discontent with the nation’s health insurers, a new study shows the market power of individual carriers continues to grow, with 99% of all metropolitan areas considered to be at near-monopolistic levels.
The study from the American Medical Association shows that 309 of the 313 metropolitan areas in 43 states are “highly concentrated,” or at a level that otherwise would incur Department of Justice and Federal Trade Commission scrutiny.
That’s up from a 2009 AMA study on the same subject, which showed that 94% of all major metropolitan markets were highly concentrated. The study cites the Herfindahl-Hirschman Index, or HHI, which is used by the DOJ and FTC in evaluating potential corporate mergers for possible antitrust concerns.
“Virtually all commercial health insurance markets in the United States are highly concentrated. These markets are ripe for the exercise of health insurer market power, which is detrimental to society,” the study says. The study is from data collected in January 2007.
AMA’s findings come as insurers are under fire for high premium rate hikes, and as Congress is about to consider repealing an antitrust exemption that insurers now enjoy. That exemption, under the McCarran-Ferguson Act, allows insurers to share data.
Insurers, meanwhile, point out other evidence that they say proves the nation’s markets are competitive. America’s Health Insurance Plans says there are eight or more insurers in each of the top 40 metro markets, and that doctors contract with about a dozen health plans on average.
“Health insurance plans operate in highly competitive markets across the country, and consumers have numerous choices in the types of plans and in insurers,” Robert Zirkelbach, AHIP spokesman, said in a written statement. “To the extent that research has raised the question of competition as a factor in rising health-care costs, it has pointed to consolidation among providers, not health plans.”
The AMA study found that those 309 metro areas had an HHI score of 1,800 or more, which constitutes the “highly concentrated” designation. The 99% figure evaluates market power for those insurers who offer HMOs and PPOs in a given market.
To further break it down, the study found that one insurer had a combined market share of 30% or more in 92% of the metro areas. In 54% of the markets, one insurer had a market share of 50% or more. A year ago, only 40% of the metro areas studied had an insurer controlling the majority of the market
Dr. James Rohack, AMA president, said it was particularly troubling that the majority of markets now have one insurer controlling most of the business. But he says some of the current proposed solutions — repealing insurer antitrust exemptions and allowing insurers to sell policies across state lines — may not be the answer.
Antitrust-exemption repeals may not be the key, and if insurers are allowed to sell across state lines, it could prove troublesome for all. Each carrier who ventures into a new market will have to comply with individualized state regulations geared to protect patient rights.
“It’s literally going to drive up administrative costs even more,” Rohack said.
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