Insurance Consolidation Controversy

Is insurance company consolidation contributing to premium hikes? Would allowing the sale of insurance across state lines make matters better or worse?

HHS Secretary Kathleen Sebelius hammered insurance companies last week about large rate increases, and she listed as one factor reduced competition because of a surge in carrier consolidation. She pointed to a recent American Medical Association report, which found that, in 24 of the 43 states it examined, the two largest insurers had a combined market share of at least 70 percent. That’s up from 18 states in the previous report. The AMA also studied 313 metropolitan markets against an index used by federal regulators to determine which markets are “highly concentrated,” where insurer consolidation “may have harmful effects on patients, physicians, employers and the economy.” The group found that 99 percent of metropolitan markets were “highly concentrated,” up from 94 percent two years before. In 54 percent of the metropolitan markets, at least one insurer had a market share of 50 percent or higher, and that’s up from 40 percent a year earlier.

Is this consolidation really a problem?