Consolidation among health insurers is creating near-monopolies in
virtually all reaches of the United States, according to a study released Monday.
Data from the American Medical Association show that in each of 43
states, a handful of top insurers have gained such a stronghold that their markets
are considered "highly concentrated" under U.S. Department of Justice
guidelines, often far exceeding the thresholds that trigger antitrust concerns.
The study also shows that in 166 of 294 metropolitan areas, or 56 percent,
a single insurer controls more than half the business in health maintenance
organization and preferred provider networks underwriting.
"This problem is widespread across the country, and it needs to be looked
at," said Jim Rohack, an AMA trustee and physician in Temple, Texas. "The
choices that patients have now are more difficult."
The AMA study cited a Justice Department benchmark in citing antitrust concerns,
the Herfindahl-Hirschman Index, or HHI. A score above 1,000 shows "moderate"
concentration. Those scoring above 1,800 yield a "high" concentration.
Figures show that 95 percent of the 294 HMO/PPO metropolitan markets studied
were above 1,800. Raise that HHI bar even higher to 3,000, and 67 percent rise
The AMA study is the latest piece of evidence — and most comprehensive
to date — showing the market power of a few companies, and a large number
of regional nonprofit Blue Cross operations, is formidable and growing. And
it comes as premiums continue to grow at near double-digit percentage rates.
Critics say that carriers are not only creating monopolies and oligopolies
in many regions, they also control the other side of the equation in what is
known as monopsony power. That means in addition to having the most enrollees,
they're also the biggest purchasers of health care and can dictate prices and
It also makes it harder for new carriers to emerge, as pricing already has
been set by the dominant carrier.
That's particularly true in North Dakota, where the state's Blue Cross Blue
Shield provider has, by various estimates, a roughly 90 percent share of the
market, said Insurance Commissioner Jim Poolman. New carriers would have to
pay more to health-care providers and charge less to policyholders to gain a
In North Dakota, there isn't much incentive for that, he added.
"It's difficult in a market of 640,000 people to write new insurance policies,"
The AMA says there have been more than 400 mergers among health-care insurers
in the past decade. As they've consolidated and presumably eliminated duplicative
functions, they're not passing the savings in personnel and administrative costs
on to consumers. Rate increases, though slowing, are higher than ever and growing
at a near double-digit pace.
Studies by the Kaiser Family Foundation show double-digit premium hikes from
2001 to 2004 — peaking with a 13.9 percent jump in 2003 — soared
well above inflation and wages. Those categories have risen at rates less than
a half to less than one-fifth that of insurance premiums, Kaiser says.
Last year, the string of double-digit jumps was broken, but was close to that
level with a 9.2 percent increase, the Kaiser study said. The foundation is
not affiliated with the nonprofit HMO of the same name.
Some health insurance analysts have said the recent uptick in premiums is part
of an "underwriting cycle," in which carriers go through a period
of boosting profits, and then ease up on premium increases for several years.
But Gary Claxton, vice president at the Kaiser Family Foundation, contends
fewer insurers mean the need for underwriting cycles has diminished, and it's
likely that carriers will settle on the high side when it comes to premium increases.
"They won't get down to cost," he said. "They see it as their
collective right not to cut prices too much."
David Colby, chief financial officer for WellPoint Inc., the nation's largest
carrier, disagreed. He said medical cost increases have forced his company to
hike premiums. He added that the percentage his company spends on actual medical
care has remained constant in recent years.
"Our premiums are pretty much tracking what medical costs are doing,"
The AMA says it has taken up this antitrust issue with the Department of Justice,
but says it has run into roadblocks with regulators. AMA officials say regulators
seem uninterested, even though government officials are more than willing to
target doctors' groups and hospitals on antitrust matters.
Justice Department officials did not respond to requests for comment.