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Health Insurer Competition Absent, AMA Says

 |  By John Commins  
   February 03, 2011

Most commercial health insurance markets in the United States are dominated by one or two health insurers, according to report this week by the American Medical Association.

The 2010 edition of Competition in Health Insurance: A Comprehensive Study of U.S. Markets found that 99% of health insurance markets in the U.S. are “highly concentrated,” based on the 1997 U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines. This indicates a significant absence of competition among insurers. In 48% of metropolitan statistical areas, at least one insurer had a market share of 50% or more, AMA reported.

“The market power of health insurers places physicians and patients at a significant disadvantage,” said AMA President Cecil B. Wilson, MD. “When insurers dominate a market, people pay higher health insurance premiums than they should, and physicians are pressured to accept unfair contract terms and corporate policies, which undermines the physician role as patient advocate.”

Robert Zirkelbach, press secretary for America’s Health Insurance Plans, disputed the findings. “Competition is vigorous among health plans across the country,” he said. “They operate in highly competitive markets in which consumers have numerous choices among plan types and insurers.  Moreover, research examining competition in healthcare markets increasingly points to provider consolidation as a significant factor contributing to rising healthcare costs.”

AMA said the concentration of health plans is in stark contrast to that of physicians, who it said are the least concentrated segment of the health care sector, with 78% of office-based physicians working in practices with nine physicians or less. Most of those are in either solo practices or practices of two to four physicians.

“The market power of health insurers continues to prompt anti-competitive concerns among physicians,” Wilson said. “To help restore a competitive balance to health insurance markets, the AMA urges the federal and state agencies to prohibit harmful insurance company mergers and adopt policies that would level the playing field between small physician practices and large insurers.”

Zirkelbach said an analysis by AHIP of last year’s AMA study was beset with errors of fact and methodology. “For example, the AMA data exclude some types of self-funded plans, a large and growing portion of the market, and show significantly higher market concentration than data available from the National Association of Insurance Commissioners,” he said. “Moreover, a simple search on the new HealthCare.gov shows that in every state, families and employers have multiple choices of both insurance plans and types of coverage.”

Zirkelbach said that AHIP’s analysis showed that the states that are often cited as examples of high market concentration actually have some of the lowest premiums in the nation.

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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