Health care choices are narrowing, says study by AMA
THE SAN FRANCISCO CHRONICLE
Health insurance mergers have created oligopolies and near monopolies in many parts of the country, limiting consumer and provider choice, according to an American Medical Association study released Monday.
The study found that in 56 percent of the regions examined in 2005, a single health insurer had a market share of 50 percent or more. One insurer had at least a one-third share in 95 percent of the markets studied.
More than 400 mergers involving health insurers and managed-care companies
have taken place in the past decade, the association noted.
“Each time we’ve seen consolidation, premiums have gone up, and choice has gone down,” said Dr. James Rohack, immediate past president of the association’s board of trustees.
The association is calling on the Department of Justice to open antitrust investigations where insurance concentration is great.
Insurers argue that consolidation creates economies of scale that ultimately drive down rates.
“Health care premiums are up because the underlying costs of health care are up dramatically. The causality is not consolidation,” said Christopher Ohman, chief executive of the California Association of Health Plans, which represents the state’s insurers.
With rates increasing nearly three times the pace of inflation, critics contend the opposite.
“A handful of insurance companies control the market and raise rates at will, far above the value of the insurance they’re selling,” said Jerry Flanagan, health policy director for the Foundation for Taxpayer and Consumer Rights in Santa Monica.
The association’s study examined 294 metropolitan regions, including 27 in
California. In the California markets, the study concluded Kaiser Permanente had
a 33 percent share and WellPoint Inc., the parent company of Blue Cross of
California, had 22 percent.
In the San Francisco region, which includes San Mateo and Redwood City, Kaiser had 46 percent of the market, with WellPoint second at 15 percent. The study lists only the top two insurers in each market.
Gary Claxton, vice president with the Kaiser Family Foundation, described California as still relatively competitive compared with much of the rest of the country.
Claxton agreed that increased medical costs play a significant role in increased health costs, including premiums. At the same time, strong hospital networks and complex contracting arrangements make it harder for new insurers to enter the market to increase competition, he noted.
Marketplace dominance was more extreme in some other parts of country. For example, in parts of Alabama, the state’s Blue Cross/Blue Shield carrier controlled more than 90 percent of the market.
California is one area significantly affected by mergers. In 2004, Anthem Inc., an Indianapolis insurer, bought the former WellPoint Health Networks Inc. in Thousand Oaks and created WellPoint, now the country’s largest insurer with 34 million members. The $16.4 billion deal was held up for months over concerns about whether California customers would shoulder transaction costs, including large executive severance packages.
Last year, UnitedHealth, headquartered in Minnesota, purchased PacifiCare Health Systems Inc., based in Orange County’s Cypress, a deal valued at more than $8 billion. Together, WellPoint and UnitedHealth control a third of the U.S. health insurance marketplace.
