http://pnhp.org/blog/2010/03/08/ama-and-goldman-sachs-on-insurer-market-concentration-and-decline-in-price-competition/ PNHP's official blog Fri, 06 Jan 2012 01:06:50 +0000 hourly 1 http://wordpress.org/?v=3.3.1 http://pnhp.org/blog/2010/03/08/ama-and-goldman-sachs-on-insurer-market-concentration-and-decline-in-price-competition/comment-page-1/#comment-13316 sbkemble Wed, 10 Mar 2010 01:04:31 +0000 http://pnhp.org/blog/?p=1471#comment-13316 What no one seems to grasp is that competition among health insurance companies doesn't bring costs down anyhow. This is because they are competing for the healthiest risk pool, and not to offer a better, more cost effective product to purchasers of insurance. Everyone quotes the AMA study a couple of years ago that showed many US markets were dominated by 1 or 2 insurance companies and bemoaned the lack of competition. However, I looked up the average cost of commercial insurance by State, and made a chart graphing that against the market share of the top 2 plans by State, from the AMA study. The graph clearly shows absolutely no correlation between competition and lower insurance cost. In fact, there is a slight negative correlation. The least competitive State in the country is Hawaii, where HMSA and Kaiser had 98% market share as of 2 years ago. Hawaii has the third lowest insurance cost of any State, and the lower cost States were Iowa and Idaho, which have much lower cost of living. My understanding is that the quality of coverage is also better in Hawaii, so Hawaii actually has the best deal in the country, in the least competitive market. What no one seems to grasp is that competition among health insurance companies doesn’t bring costs down anyhow. This is because they are competing for the healthiest risk pool, and not to offer a better, more cost effective product to purchasers of insurance. Everyone quotes the AMA study a couple of years ago that showed many US markets were dominated by 1 or 2 insurance companies and bemoaned the lack of competition. However, I looked up the average cost of commercial insurance by State, and made a chart graphing that against the market share of the top 2 plans by State, from the AMA study. The graph clearly shows absolutely no correlation between competition and lower insurance cost. In fact, there is a slight negative correlation. The least competitive State in the country is Hawaii, where HMSA and Kaiser had 98% market share as of 2 years ago. Hawaii has the third lowest insurance cost of any State, and the lower cost States were Iowa and Idaho, which have much lower cost of living. My understanding is that the quality of coverage is also better in Hawaii, so Hawaii actually has the best deal in the country, in the least competitive market.

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