AMA study: Most U.S. metro areas lack major health insurance competition

John Egan

Four of every five U.S. metropolitan areas lack significant competition in the private health insurance market, according to a study released Oct. 25 by the American Medical Association (AMA), a trade group for physicians.

The study’s authors assert that health insurance mergers have “resulted in the possession and exercise of health insurer monopoly power — the raising and maintaining of premiums above competitive levels — instead of passing any benefits of consolidation such as lower premiums from enhanced efficiencies on to consumers.”

Dr. Peter Carmel is president of the American Medical Association.

AMA: Mergers may cause ‘competitive harm’

The AMA study found that:

• 83 percent of the 368 metro areas examined by the AMA had a substantial absence of health insurer competition as of January 2009. That assessment is based on guidelines from the U.S. Department of Justice and Federal Trade Commission.

• In about half of the metro areas, at least one private health insurer had a market share of 50 percent or more.

• In half of the 48 states examined, the two largest private health insurers had a combined market share of at least 70 percent.

• The 10 states with the least competitive private health insurance markets were, in ascending order, Alabama, Alaska, Delaware, Michigan, Hawaii, District of Columbia, Nebraska, North Carolina, Indiana and Maine.

• The 10 states with the most competitive private health insurance markets were, in descending order, Oregon, Missouri, Pennsylvania, Colorado, West Virginia, New York, Ohio, California, Nevada and Washington.

In a statement, AMA President Dr. Peter Carmel, a pediatric neurosurgeon in Newark, N.J., says the study “demonstrates the degree of anti-competitive market clout that some health insurers have gained through mergers and acquisitions. Our new report is intended to help regulators, lawmakers, researchers and policymakers identify markets where mergers among health insurers may cause competitive harm to patients, physicians and employers.”

Health insurance group: ‘Competition is vigorous’

Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, a trade group for health insurers, takes issue with the AMA study.

“Competition is vigorous among health plans across the country. They operate in highly competitive markets in which consumers have numerous choices among plan types and insurers,” Zirkelbach says. “Moreover, research examining competition in health care markets increasingly points to provider consolidation as a significant factor contributing to rising health care costs.”

Zirkelbach says the Federal Trade Commission and Department of Justice have determined that private health insurers operate in highly competitive markets. At least eight health insurance options are available in each of the country’s 40 largest metro areas, he says.

States often cited as having a low number of health insurance competitors actually have some of the lowest premiums in the country, according to America’s Health Insurance Plans.

“Just because one plan has a large market share does not mean that consumers do not have (a) choice of plans,” the health insurance group says. “Some companies may have large market share because they have been around a long time, they offer the most affordable options or they have the highest satisfaction rates – that is the essence of competition.”