The following is part of a series of original guest columns by the American Medical Association.
by J. James Rohack, MD
Physicians in nearly every area of the country face a David and Goliath scenario when negotiating with entrenched health insurance companies. This is clearly illustrated by a new AMA study showing that competition in the health insurance industry is disappearing as more markets across the country are dominated by one or two insurers.
Most alarmingly, in 24 of the 43 states reported in the new AMA study, the two largest insurers had a combined market share of 70 percent or more in 2007. The year before, just 18 of 42 states had two insurers with a combined market share of 70 percent or more. The AMA study also found that 99 percent of metropolitan markets are “highly concentrated” according to federal merger guidelines – up from 94 percent of metropolitan markets the year before.
The near total collapse of competition in health insurance markets occurred as insurers amassed dominant market power through years of unrestrained mergers. Between 1996 and 2008, there were more than 500 mergers involving managed care insurers, but federal antitrust regulators challenged only three.
While the health insurance industry is the most consolidated sector in the health care system, nearly half of the nation’s patient care physicians are in small or solo practices (1 to 4 physicians). This imbalance allows the largest health insurers to flex their market power and substitute corporate policy for a physician’s best medical judgment.
The physician role as patient advocate is being undermined as insurers gain leverage over patient care decisions. Conditions in most markets are now heavily tilted toward insurers, giving them an unprecedented advantage in determining the scope, coverage and quality of health care.
Patients have not benefited from the virtual unlimited power insurers have over health care. Health insurers have posted historically high profits, even during times of economic slowdown. The premiums they charge have soared without an expansion of patient benefits. Average insurance premiums for family coverage have risen 131 percent in ten years to $13,375.
Despite the fact that only health plan executives and shareholders appear to be benefiting from the profitable absence of competition, health insurance companies have recently proposed amazingly high premium increases. For instance, Anthem Blue Cross of California proposed a 39 percent premium increase to cover “rising medical costs.”
Anthem’s proposed 39 percent premium hike is out of step with the latest figures showing that increases in U.S. health care spending slowed to 4.4 percent, the slowest rate of growth in nearly 50 years. Spending for physician and clinical services grew 5 percent, the slowest rate of growth since 1996. While insurers propose double-digit price increases, the latest figures show prices for physician services increased by only 2.7 percent. In fact, inflation adjusted physician fees decreased by 25 percent between 1996 and 2006.
Huge premium hikes in the face of record low health care spending figures demonstrate that insurance companies cannot promise that bigger is better. More oversight is needed to make certain that insurers are not funding their multi-billion dollar merger and acquisition strategies on the backs of patients, physicians and employers.
There are steps that can be taken right now to restore a competitive balance to health insurance markets. One is a renewed commitment by federal and state agencies to enforce antitrust laws that prohibit harmful mergers. The AMA has urged the Department of Justice to consider additional steps:
* Perform a retrospective study of health insurance mergers similar to that performed by the Federal Trade Commission on hospital mergers;
* Commission new research to identify causes and consequences of health insurer market power;
* Create a system for predicting the effects health insurer mergers will have on consumer and provider markets.
We are also urging federal regulators to relax the current rigid antitrust policies that discourage small and solo physician practices from joint arrangements that would improve the efficiency and coordination of patient care. This crucial step would level the playing field and allow physicians to negotiate contract terms with large insurers, ensuring that patients and their physicians make health care decisions, not insurers.
We hope our new study on health insurance competition will renew the long overdue dialogue among regulators, policymakers, lawmakers, and others about the imbalance in health care, and lead toward a better, more open and competitive marketplace to benefit patients and the physicians who care for them.
J. James Rohack is President of the American Medical Association.
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