The Pennsylvania chapter of Health Care for America Now released a new report today showing that consolidation in the private health insurance industry is creating skyrocketing premiums for both patients and employers. Pennsylvania’s two largest health insurers, Highmark and Independence Blue Cross control 72 percent of the market statewide. When looked at a local level, however, the situation is even worse, with three out of four local market ratings being dominated by a single company. From the point of view of the regional insurance markets, Pennsylvania has levels of concentration exceeded by only twelve states.
This kind of consolidation means that an insurer can, without fear of consequences, raise premiums and/or reduce the variety of plans or quality of services offered to customers. This is what we have seen: from 2000 to 2007, premiums in Pennsylvania had risen 86 percent compared to a meager 13 percent increase in wages. This means health insurance premiums grew 6.4 times faster than wages from 2000 to 2007.
Premium increases are continuing. Recently, HCAN PA criticized Independence Blue Cross for raising its premiums in the non-group market up to 52%. Highmark is also calling for double digit premium increases in this market.
There is only on area in Pennsylvania where there is significant competition. In central Pennsylvania where Highmark competes with Capitol Blue Cross. According to David Balto, of the Center for American Progress, “Highmark’s expansion resulted in greater competition, lower premiums and improved service and CBC and Highmark battled head-to-head for subscribers, employers, and providers.”
“When just a couple of companies hold a near-monopoly, they not only set the prices, but they also make the rules and call the shots,” said Marc Stier, PA State Director of HCAN. Antoinette Kraus of the Philadelphia Unemployment Project added that “Private health insurance companies have proven year after year they’ll do whatever they want when left to their own devices.”
Richard McVay of Penn Action concluded that ” It’s time for real comprehensive reform that includes regulation and the choice of a public health insurance plan so we are no longer at the mercy of the private health insurers in Pennsylvania.”
The American Medical Association reports that the health insurance marketplace is dangerously concentrated with 94 percent of local markets in the United States currently considered highly concentrated. And contrary to what the health insurance industry claims, these mergers have undermined market efficiency. Premiums nationwide have gone up an average of more than 87 percent over the past six years.
“There is no real choice or competition in the private health insurance market, and only giving everyone the option of a public health insurance plan will guarantee we get quality, affordable health care we all can count on this year,” said Ian Phillips of ACORN, an HCAN coalition partner. Marc Stier added, “A public health insurance option will force private health insurance companies to control cost, guarantee quality, stop hiding what they will and won’t cover, and put people’s health before corporate profit.”
Some facts about the insurance industry in Pennsylvania:
- Highmark and Independence Blue Cross together control 72 percent of Pennsylvania’s market for commercial health insurance. As measured by the standard used by the US Justice Department, the Herfindahl-Hirsman concentration index (HHI), Pennsylvania’s score was 2799 l. A market is considered “highly concentrated” when the HHI score is above 1800.
- In Southeastern Pennsylvania, Independence Blue Cross controls 72% of the market alone. The HHI in this region is 5440.
- In Western Pennsylvania, Highmark controls 74% of the market leading to an HHI of 5634.
- In Northeast Pennsylvania, NE Blue, which is controlled by Highmark, has 63% of the market with an HHI of 452.
- Health insurance premiums for Pennsylvania working families have skyrocketed, increasing 86 percent from 2000 to 2007.
- For family health coverage in Pennsylvania during that time, the average annual combined premium for employers and employees rose from $6,721 to $12,513.
- For family health coverage in Pennsylvania, the average employer’s portion of annual premiums rose 76 percent, while the average worker’s share grew by128 percent
From 2000 to 2007, the median earnings of Pennsylvania workers increased 13 percent, from $24,834 to $28,155. During that time health insurance premiums for Pennsylvania working families rose 6.4 times faster than median earnings.