Patient Support & Advocacy

10 states where health insurance competition has fallen the most

A new AMA ranking of states where health plan competition has most fallen underscores a growing risk of large insurers exercising market power, such as charging higher premiums to patients and making lower payments to physicians.  

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The list of 10 states that experienced the greatest competition drop from 2017 to 2018 is part of a more general trend in health insurance markets across the U.S. Four of those states were also on last year’s list, which considered decreases between 2017 and 2018, reflecting ongoing competition declines in those markets. Three states also appear on a companion list of the top 10 least competitive states in 2018.

Those and other striking insights are contained in the AMA’s 2019 update of Competition in Health Insurance: A Comprehensive Study of U.S. Markets. Written by the AMA Division of Economic and Health Policy Research, it is the 18th edition of the AMA’s ongoing documentation and analysis of health insurance market concentration and is based on data from 2018.  

It presents combined and separate data on four commercial insurance product lines, including preferred provider organizations, health maintenance organization, point-of-service and public health exchanges. 

Read the report.

In addition to the state results, the study also presents its analysis in terms of the communities where patients and physicians live. Of the 382 metropolitan statistical areas (MSAs) studied, 75% were found to be highly concentrated, as measured by the Herfindahl-Hirschman Index (HHI). The comparable proportion was 71% in 2014.  

The HHI is “a commonly accepted measure of market concentration,” according to the Justice Department and Federal Trade Commission, which use the HHI in evaluating mergers. The HHI measures market concentration on a point scale—higher HHIs suggest lower competition. HHIs above 2,500 represent highly concentrated markets. When measured at the state level, more than 63% of markets were highly concentrated in 2018. 

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10 states with the least competitive health insurance markets

Top 10 slipping states 

Here are the 10 states that had the greatest drops in competition, with the market share of the largest health insurer, the HHIs in 2018, and the 2017–2018 HHI increases:  

  • Utah—47% (HHI: 2,804, up 459). 
  • Louisiana—72% (HHI: 5,384, up 359). 
  • Florida—40% (HHI: 2,455, up 295). 
  • New Hampshire—47% (HHI: 2,961, up 281). 
  • Alabama—86% (HHI: 7,443, up 250).  
  • Alaska—62% (HHI: 4,612, up 229). 
  • Iowa—50% (HHI: 3,401, up 221). 
  • Tennessee—44% (HHI: 2,985, up 203).  
  • Massachusetts—37% (HHI: 2,051, up 179). 
  • Wyoming—45% (HHI: 3,116, up 156). 

Three of the states that competitively fell the most are also on the top 10 list of states with the lowest level of health-plan competition—Alabama, Louisiana, which hold the Nos. 1 and 2 spots, and Alaska. Other states on that list are Hawaii, Delaware, South Carolina, Michigan, Kentucky, North Dakota and Illinois. In every case, those state-level HHIs are at or above 3,850, and a single insurer controls 56% or more of the commercial market. 

Related Coverage

Most commercial health insurance markets are highly concentrated

Large local drops over time 

The average HHI across MSA-level commercial markets was 3,504 in 2018. 

Fifty-eight percent of markets experienced an increase in the HHI between 2014 and 2018, and in 20% of markets the increase was at least 500 points. In markets with a rise in the HHI, the average increase was 498 points.  

“We found evidence of increases in concentration in markets that were already highly concentrated in 2014 as well as in those that were not. More than half (54%)
of the markets that were highly concentrated in 2014 became even more concentrated in 2018,” the report says. 

Among the markets that were not highly concentrated in 2014, 27% experienced an HHI increase to move into the highly concentrated category by 2018. Another 40% also posted an HHI increase, but not enough to be considered highly concentrated.