Insurance companies with a small share of the health insurance market have virtually disappeared from Obamacare state health care exchanges, replaced by big-foot carriers that have traditionally dominated the market, according to a congressional watchdog study.
The U.S. Government Accountability Office found in a study made public earlier this week that in 40 states the largest insurers either maintained or boosted their market share through the health exchanges established by the Affordable Care Act. The GAO analysis is the first federal study published focusing on how competition within the health insurance market has been affected by Obamacare.
The study also found that small-insurer offerings nearly vanished from the exchanges. In 2012, consumers in the individual insurance market on average could choose among 36 small-market company carriers in their state, each holding a market share of five percent of or less.
But by 2014 those consumers could on average choose from only three insurers in their state exchanges, a decline of more than 90 percent.
In the small-group insurance market, at least 15 small-market carriers were available to consumers before Obamacare. But under the exchanges, consumers found only three insurance companies still competing on average.
“Most of the largest issuers of health coverage from 2012 participated in the exchanges,” the study said, but “most smaller issuers with less than 5 percent of the 2012 market did not participate in the 2014 exchanges,” GAO said.
Sen. Tom Coburn, R-Okla., who requested the GAO study, told the Washington Examiner that “the GAO report provides evidence that the health care law’s burdensome requirements may be giving an unfair advantage to big insurers over smaller ones.”
Obamacare’s architects did not envision that the exchanges would reward big insurance companies at the expense of small insurers. One of the often-repeated talking points for the proposed program was that Obamacare would increase competition, not lessen it.
In a Sept. 9, 2009, address before a special joint session of Congress on health care, President Obama emphasized the importance of competition in the health insurance marketplace, declaring, “consumers do better when there is choice and competition,” adding, “without competition, the price of insurance goes up and quality goes down.”
A few days before the president’s address, White House Senior Adviser David Axelrod told NPR that a government-sponsored healthcare program would serve “as a device to promote competition and choice and keep the insurance companies honest.”
The trend toward greater health care insurance industry consolidation under Obamacare could be seen on a case-by-case review across the nation. In Illinois, for instance, the American Medical Association reported last November that Blue Cross Blue Shield’s market share was 51 percent.
But by this past May, Crain’s Chicago Business reported that “Blue Cross scored 92 percent of the 217,500 people who signed up for coverage during the first enrollment period for the health insurance exchange Illinois set up under federal health care reform.”
In New Hampshire, more than 40,000 signed up for Obamacare coverage. But all of them picked one company, Anthem Blue Cross Blue Shield, according to a June 12 advisory board company report.
In March, the Kaiser Family Foundation examined a handful of states to evaluate competition among insurers and found that in Connecticut, two insurers previously held 54 percent of the market, but now control 97 percent of the exchange market.
In Washington state, Kaiser found that three insurers hold 92 percent of the exchange market. In Rhode Island, two insurance companies hold a 97-percent marketshare.
In California, health advocates were pleased that 11 insurers participated in that state’s health exchange. But four of the insurers within the exchange hold more than 90 percent of the market.
Mark V. Pauly, a health economist with the Wharton School at the University of Pennsylvania, said that while the president and officials in his administration claimed they wanted more competition among insurers, Obamacare has put in place regulations that limit it.
“It’s part of the schizophrenia that the administration wanted lots of competition, but, on the other hand, they wanted to put a lid on profits that would attract competition,” Pauly said. “You can’t have it both ways.”
Grace-Marie Turner, president of the right-leaning Galen Institute think tank, said the outcome was tragic “because it’s often the little guys who are more nimble and more creative and often provide real competition for the big companies.”
