3 Carriers Control Health Insurance Market

From 2010 through 2013, individual market competition continued to dwindle.
From 2010 through 2013, individual market competition continued to dwindle.

The biggest gorillas in the U.S. commercial health insurance market got bigger from 2010 through 2012.

The gorillas in the individual market continued to gain share in 2013. Competition in the group market might have grown slightly, according to some measures, between 2012 and 2013.

John Dicken, a director at the U.S. Government Accountability Office (GAO), has published data supporting these conclusions in a new report on market concentration in the commercial health insurance market.

The GAO prepared the analyst for a group of lawmakers that included both Republicans and Democrats.

Some health policy watchers contend that one carrier comes to dominate the health insurance market in many states because the health insurance market is different from other markets, and the providers and patients may prefer to work with one great carrier, or just a few great carriers.

Critics of health insurance market concentration contend that a lack of competition may increase the cost of coverage and stifle innovation in some markets.

Many of the drafters of the legislation that became the Patient Protection and Affordable Care Act (PPACA) hoped to increase the level of competition in the health insurance market. Some PPACA measures that are supposed to increase competition started to take full effect in January this year.

Those measures include the start of the PPACA public health insurance exchange system; the rise of the new nonprofit, member-owned CO-OP plans; and the birth of a Multi-State Plan program. In some states, officials may be able to use some PPACA tax credit subsidy money to create a new Medicaid-like buy-in program for the working poor. PPACA also requires the GAO to shed light on the issue, by studying concentration in the health insurance market.

To learn more about what GAO investigators found, read on.

GAO competiton maps -- lots of concentrated state markets

1. The three insurers with the highest market share in a state have a firm grip on most state markets.

One way to analyze market concentration is to look at the share of the market controlled by the top three players.

GAO investigators found that, in 2013, one, two or three insurers controlled 80 percent or more of commercial health insurance enrollment in:

  • 39 states in the individual market.
  • 37 states in the small-group market.
  • 40 states in the large-group market.

See also: GAO: Small Group Concentration Worse

Bar charts showing concentration increased steadily in the individual market and peaked in 2012 in the group markets.

2. The number of states with highly concentrated markets grew each year in the individual policy market and may have peaked in 2012 in the small-group and large-group markets.

The number of highly concentrated states increased to 38 in the individual market in 2013, from 30 in 2010 — when health policymakers and members of Congress were already complaining bitterly about lack of competition in the health insurance market.

The number of concentrated states increased to 37, from 34, in the small-group market, and to 40, from 38, in the large-group market.

The number of highly concentrated states may have fallen by one in the small-group and large-group markets between 2012 and 2013. But total average share controlled by the top-three players in states’ small-group markets fell only slightly, to 85 percent, from 86 percent. The average share controlled by the top-three players in states’ large-group markets held steady, at 87 percent.

See also: Hearing Witnesses Complain About Health Carrier Consolidation

Excerpt from report talking about the dominance of the Blues

3. Many customers sing for the Blues.

A Blue Cross and Blue Shield insurer dominated the individual markets in 44 states, the small-group markets in 38 states, and the large-group markets in 40 states.

See also: North Carolina bill challenges Blues’ contract provision