Why you need a control group, insurance competition edition

David Freddoso rails against the lack of competition in the ACA:

Obama made one promise you may not remember – an implicit promise – while speaking before Congress in September 2009.

He decried the fact that “in 34 states, 75 percent of the insurance market is controlled by five or fewer companies. In Alabama, almost 90 percent is controlled by just one company. And without competition, the price of insurance goes up and quality goes down.”

He was clearly implying that his health care reform law would improve this situation. Today, we can see whether it has.

He supplies data:

In Obamacare’s first year, consumers in only 313 of the 3,135 U.S. counties will have more than five insurers available through the ACA exchange.

Lest you think this number is used as some kind of trick, note that this does not include such major U.S. cities such as Atlanta, Chicago, Philadelphia, Pittsburgh, Raleigh, Louisville, Indianapolis, Columbus, Kansas City, Saint Louis … well, let’s just say a whole bunch of big and important cities have less than five insurers.

In 78 percent of U.S. counties, customers have a choice between three ACA insurers or fewer. And in 17 percent of U.S. counties – including all counties in New Hampshire and West Virginia – just one insurer has a monopoly on the subsidized exchanges.

In 31 of the 50 states, not a single customer has a choice on the exchange of more than four insurance companies.

In 21 states (including five of the six New England states and five Southern states), no customer has a choice of more than three insurers.

OK, I suppose that sounds bad. Do I wish we had more competition? Sure. Do I wish Obamacare did more to encourage competition? I guess.

But the real question is how much of a change this was from before. Here’s a report from the AMA in 2011:

The AMA’s latest findings regarding competition in the health insurance industry include:

  • A significant absence of health insurer competition exists in 83 percent of metropolitan markets studied by the AMA. These markets rated “highly concentrated,” based on the newly revised Horizontal Merger Guidelines issued last year by the U.S. Department of Justice and Federal Trade Commission*.
  • In about half of metropolitan markets, at least one health insurer had a commercial market share of 50 percent or more.
  • In 24 of the 48 states reported in the new AMA study, the two largest health insurers had a combined commercial market share of 70 percent or more.
  • The 10 states with the least competitive commercial health insurance markets, are: 1. Alabama, 2. Alaska, 3. Delaware, 4. Michigan, 5. Hawaii, 6. District of Columbia, 7. Nebraska, 8. North Carolina, 9. Indiana and 10. Maine.

I don’t know what the correct amount of competition should be. But it’s not enough to say that it’s bad now. We had bad competition in “four out of five US insurance markets” before the ACA. This system has been broken for a long, long time.


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