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OPINION

Health plan competition: Numbers confirm tilted market

A landmark report from the AMA provides the numbers that show how individual health plans dominate many local markets.

Editorial. Dec. 17, 2001.


Physicians can estimate when a health plan has acquired too much marketplace clout by how crummy a contract it offers, take it or leave it. Lawmakers and regulators, who have the power to level the playing field, require a somewhat more comprehensive and technical analysis.

A new report from the AMA gives those policy-makers the numbers they need to begin understanding the extent of consolidation in the health insurance industry. The report uses the federal government's preferred measure of market concentration -- the Herfindahl-Hirshman Index -- to demonstrate the degree to which plans have captured dominant positions in local and state markets. It studied 40 large city markets (1 million-plus population "metropolitan statistical areas") and 19 less densely populated states, in terms of health maintenance organization and preferred provider organization enrollment.


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The overarching message is that significant marketplace concentration -- sometimes overwhelmingly so -- exists in many areas. For example, almost half the large metropolitan markets were rated as "highly concentrated" in terms of the combined HMO/PPO market, and HHI concentration scores go even higher when those product lines are examined individually. In nearly half of those highly concentrated metropolitan markets, a single insurer holds more than 40% of market share; in nearly a quarter, a single insurer has more than 50%. Eighty-four percent of the 19 state HMO/PPO markets were highly concentrated. In more than half those states, a single insurer holds more than 50% of the market; in nearly a third, a single insurer has a greater than 70% market share. More information from the report, titled "Competition in Health Insurance," can be found in an executive summary available on the AMA's Private Sector Advocacy site (http://www.ama-assn.org/go/psa). [...]

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Copyright 2001 American Medical Association. All rights reserved.

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