Marketplace domination: Watching out for insurer mergers

With health plans' power getting ever more concentrated, it's more urgent than ever for regulators to scrutinize big plan consolidations.

Editorial. June 7, 2004.

It was like a preview of coming attractions before a movie. Only a few weeks before the AMA issued its latest report on health plan market concentration, UnitedHealth Group announced it was paying $4.7 billion to buy Oxford Health Plans Inc. as a way to increase rapidly its business in the Northeast, as well as gain access to sell multistate plans to the 90 Fortune 500 companies located within Oxford's operating area.

With such a buildup, the numbers in the report, "Competition in Health Insurance: A Comprehensive Study of U.S. Markets, 2003 Update," are all the more shocking. Out of 84 metropolitan areas studied, AMA Private Sector Advocacy found that 78 of them meet the 1997 Dept. of Justice and Federal Trade Commission definition of "highly concentrated" in terms of HMO/PPO market share. That's 93% -- up from 87% (61 out of 70 metro areas) from the previous year's report. In 26 states where reliable metropolitan-level data wasn't available, 22 -- 85% -- were highly concentrated. All the other markets were considered concentrated -- there's no market where individual health plans have failed to gain significant market share.

In 90% of the 84 metro areas and 88% of the 26 states, one company represented more than 30% of the HMO/PPO market. In 37% of the metro areas and 42% of the states, one company represented more than half the market.