Health insurance exchanges will promote competition

Most states and metropolitan areas have little choice when it comes to health insurance, with only a few plans making up a large share of the market, according to an American Medical Association study. However, the AMA and others see some hope that competition in health insurance might return.

State health insurance exchanges are coming in 2014 as part of the Patient Protection and Affordable Care Act. They are intended to give uninsured consumers a competitive marketplace of health plans. The uninsured face a tax penalty if they don't purchase insurance. The AMA and others said the exchanges can create a more competitive insurance marketplace overall.

"The AMA envisions that health insurance exchanges created by the health reform law will have a critical role in expanding insurer competition," said AMA President Peter W. Carmel, MD, a pediatric neurosurgeon in Newark, N.J. "Millions of currently uninsured Americans will benefit from having a patient-friendly market with more health insurance choices tailored to meet their needs."

The AMA's 10th annual report on the level of competition in the health insurance industry found, as in the past, a high degree of market concentration nationwide. The AMA report said 83% of 368 metropolitan areas studied qualify as "highly concentrated" according to guidelines used by the U.S. Dept. of Justice Antitrust Division. Thirty-nine out of 47 states, as well as the District of Columbia, also are highly concentrated, with an additional seven "moderately concentrated." Oregon is the only state where the health insurance market is not concentrated. (Montana, North Dakota and Wisconsin are not in the study.)

The study is an analysis of survey results reported by HealthLeaders-InterStudy, a managed care research firm in Nashville, Tenn., and based on data from Jan. 1, 2009. For the first time, the study includes enrollment in self-insured plans, where an employer bears the costs of claims and sets coverage rules but typically hires a health insurance company to handle the plan's administration.

The AMA study, released Oct. 26, isn't comparable to past studies because in August 2010, the Justice Dept. changed its standards for what makes a market highly or moderately concentrated. In the AMA's 2010 report, 99% of metropolitan markets were highly concentrated under the old Justice Dept. guidelines.

America's Health Insurance Plans, a health insurance trade group, says that, like the AMA, it supports robust competition and sees exchanges as key to maintaining and promoting consumer choice. But AHIP does not agree that competition is stifled in the current marketplace.

"Consumers in every market have numerous choices among plan types and insurers," spokesman Robert Zirkelbach said in a statement.

AHIP, along with the BlueCross BlueShield Assn., the National Retail Federation, the U.S. Chamber of Commerce, PhRMA, the American Osteopathic Assn., the Healthcare Leadership Council and other trade groups, is part of the advocacy group Coalition for Choice and Competition.

The coalition's mission is to "to educate key policymakers on the importance of assuring consumers' rights to access and choice when purchasing health care coverage by providing guidance on federal regulations and support to state affiliates of coalition partners."

The coalition supports allowing any "qualified plan" to offer coverage in an exchange, limiting restrictions on what types of coverage can be sold in the exchanges and leaving premium regulation to states.

Meanwhile, the Kaiser Family Foundation released its own study of insurance market competition on Oct. 13. The study is based on 2010 enrollment figures reported to the National Assn. of Insurance Commissioners and compiled by research firm Mark Farrah Associates, a health care research firm in Kennebunk, Maine.

The report found "substantial variation" in the level of competition in individual and small group insurance markets. But the foundation said that in 30 states, a single insurer holds at least half of the individual insurance market, and the same is true of the small group market in 26 states. The AMA's study counted 22 states and the District of Columbia as having plans that controlled more than half of the overall health insurance market.

Larry Leavitt, senior vice president of the Kaiser Family Foundation, said researchers wanted to provide a state-level analysis to "inform some of the decisions federal and state policymakers are making as far as rate regulation and also whether and how to set up exchanges."

He said establishing exchanges will improve competition.

"It will allow consumers and small businesses to shop around like they're not able to now," Leavitt said. "But even with those changes, there's likely to be big variations in how competitive insurance markets are."