Health plans extend their market dominance

Members of Congress and state lawmakers have called health insurance executives on the carpet to make them explain why their companies are hiking individual insurance rates so steeply across the country. A recently released American Medical Association study of health insurance markets gives one answer: Because they can.

The AMA's most recent look at the health insurance market -- "Competition in health insurance: A comprehensive study of U.S. markets," released Feb. 23 and based on 2009 data -- finds that 99% of 313 metropolitan areas tracked would be considered to have "highly concentrated" insurance markets under guidelines used by the U.S. Dept. of Justice and the Federal Trade Commission. In its 2009 version of the study, the AMA found that 94% of metropolitan areas were ranked "highly concentrated." (See correction)

Only Miami, Fort Lauderdale, Fla., and Colorado Springs, Colo., are not considered to have highly concentrated markets. But even these metropolitan areas are not deemed to have competitive markets but instead are rated as "moderately concentrated." The Justice Dept. and the FTC would consider a highly or moderately concentrated rating as a point against a merger or acquisition of plans within the same market.

One insurer held 70% or more of the health plan market share in 24 of 43 states measured, up from 18 in 42 states in the previous year's study. In 92% of the 313 markets in the report, one insurer held at least a 30% share. (See correction)

In past releases of its survey, the AMA has noted that insurer market dominance has allowed health plans to force physicians into take-it-or-leave-it contracts. But this year the AMA -- echoing other experts -- noted that market dominance has allowed plans to give patients take-it-or-leave-it pricing.

"The near total collapse of competitive and dynamic health insurance markets has not helped patients," AMA President J. James Rohack, MD, said in a statement. "As demonstrated by proposed rate hikes in California and other states, health insurers have not shown greater efficiency and lower health care costs. Instead, patient premiums, deductibles and co-payments have soared without an increase in benefits in these increasingly consolidated markets."

The California rate hike came courtesy of Anthem Blue Cross, which notified members that it would raise individual insurance premiums by as much as 39%.

The increase was decried by President Obama and Secretary of Health and Human Services Kathleen Sebelius, who produced a report examining not only Anthem's business in California but also rate increases for individual coverage across the country. A House subcommittee also brought executives from Anthem's parent company, WellPoint, to Washington, D.C., to answer questions on why the hike was so high.

After hearing from Anthem policyholders who described feeling trapped with coverage that had become unaffordable, Rep. Lois Capps (D, Calif.) drew a connection between the higher rates and the lack of competition between insurers in many markets.

"Listening to a couple of my colleagues, and your responses to them, just makes the case for me as one member of Congress that we really do need a lot more competition within the health insurance market," she said.

Dr. Rohack said the AMA is calling for the Justice Dept. and state agencies "to more aggressively enforce antitrust laws that prohibit harmful mergers."

The AMA said it also wants the department to consider a retrospective study of health insurance mergers; conduct research to identify the causes and consequences of health insurance market power; and create a system for predicting the effects that health insurance company mergers will have on patients and physicians.

Thomas Greaney, a former Justice Dept. attorney who now teaches at the Saint Louis University School of Law, said there's little that the federal government can do to reverse health insurance consolidation after the fact. Instead, the Justice Dept. might look for ways to encourage companies to enter new markets and could step up enforcement of existing rules. "But that doesn't do much to deconcentrate; it just controls how they exercise their market power," he said.

Robert Zirkelbach, spokesman for trade group America's Health Insurance Plans, said the AMA report gives a limited view of the health insurance marketplace. His organization and health plan executives have said rate hikes relate to the cost of care and the deterioration of the risk pool as more people lose their jobs, and as more young, healthy people elect not to buy insurance.

"Health insurance plans operate in highly competitive markets across the country," Zirkelbach said in a statement.

He also noted that most metropolitan areas have highly concentrated hospital markets and saw an increase in hospital concentration in recent years. "To the extent that research has raised the question of competition as a factor in rising health care costs, it has pointed to consolidation among providers, not health plans," Zirkelbach said.

But practicing physicians say the effects of health insurers' monopsony power continues to affect their livelihoods.

In Alabama, for instance, Blue Cross and Blue Shield of Alabama controls about 90% of the HMO and PPO insurance market for the state. Alabama has the most highly concentrated health insurance markets in the country, according to the AMA's report.

Blue Cross tries to give physicians a voice through its advisory committees and sees physicians as partners, said company spokeswoman Koko Mackin.

Though patients tend to like that Blues membership grants access to virtually every physician in the state, the plan's control of the insurance market doesn't help physicians, said Jorge Alsip, MD, an emergency physician in Daphne, Ala., who is president of the Medical Assn. of the State of Alabama.

"We're at a big disadvantage in terms of wanting to negotiate on fee schedules or contracts," he said. "Your choices are either to accept what they pay or quit taking Blue Cross."