HealthLawProf Blog

Editor: Katharine Van Tassel
Akron Univ. School of Law

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Friday, July 3, 2009

Insurance Concentration

Steven Benen of the Washington Monthly reports on the concentration in the insurance industry:

Zachary Roth has a very good piece today pointing to a HCAN report documenting the fact that most Americans don't enjoy "anything like a competitive marketplace for health care."

The report, released by Health Care for America Now (HCAN), uses data compiled by the American Medical Association to show that 94 percent of the country's insurance markets are defined as "highly concentrated," according to Justice Department guidelines. Predictably, that's led to skyrocketing costs for patients, and monster profits for the big health insurers. Premiums have gone up over the past six years by more than 87 percent, on average, while profits at ten of the largest publicly traded health insurance companies rose 428 percent from 2000 to 2007.

Far from healthy market competition, HCAN describes the situation as "a market failure where a small number of large companies use their concentrated power to control premium levels, benefit packages, and provider payments in the markets they dominate."

So extreme is the level of consolidation, in fact, that one former top Federal Trade Commission official working with HCAN has sent a letter to the Justice Department's Antitrust Division, asking for an investigation into the health insurance marketplace.

Specifically, the Justice Department considers a marketplace "highly concentrated" if a company's market share tops 42%. HCAN found 10 states in which one or two companies control 80% or more of the market. In Alabama, home to Sen. Richard Shelby (R), one of the strongest opponents of reform, Blue Cross Blue Shield controls 83% of the statewide market.

Individual insurance companies enjoy practical monopolies in many parts of the country, which keeps prices high, profits high, and consumers screwed. It's why the public option is seen as such a serious threat -- it would introduce at least some competition, and offer consumers some choices. . . .

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