How Health Insurance Monopolies Affect Your Care

Mobile, ala. – Not a long time ago, Dr. Richard Menger, a neurosurgeon, was ready to operate on a 16 -year -old with complex scoliosis. A team of doctors had spent months preparing for surgery, consulting orthopedists and cardiologists, even by printing a 3D model of the teenage column.

The operation was scheduled for a Friday when Menger learned the news: the teenager’s insurer, Blue Cross Blue Shield of Alabama, had denied the coverage of surgery.

This has not been particularly surprising for Menger, who has been training in Alabama since 2019. The Alabama has essentially a private insurer, Blue Cross Blue Shield of Alabama, which holds 94% of the large group insurance diets, according to the non -profit non -profit KFF. This domination allows the insurer to regularly refuse complaints, say many doctors, bill people more for coverage and pay lower rates to doctors and hospitals than in other states.

“This makes natural problems even more amplified because there is no competition or choice on the market,” explains Menger, who in 2023 wrote an editorial 1819 NewsA local information site, arguing that the end of the blue blue shield of the Alabama health insurance monopoly would make people in the better state.

Blue Cross Blue Shield of Alabama also has the largest share of individual insurance plans in the state, according to data from Centers for Medicaid & Medicare Services. Perhaps not by coincidence, the Alabama also had the highest denial rates for the network complaints of insurers on the individual market in 2023, according to a KFF analysis: 34%. The neighboring Mississippi, where the majority insurer has less market share at 81%, has an average denial rate of 15%.

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Alabama is an extreme case, but people in many other states are also faced with health insurance monopolies. An insurer, Premera Blue Cross Group, has a share of 94% of the large group market in Alaska, and Blue Cross Blue Shield of Wyoming has a 91% market share in this state. In 18 states, an insurer holds 75% or more from the large group health insurance market, according to KFF data.

These monopolies increase costs, explains Leemore Dafny, professor at the Harvard Business School and the Harvard Kennedy School who has long studied competition between health insurance companies and providers.

“More competitors tend to lead to lower bonuses and more generous advantages for consumers,” she said. “There are a lot of concerns on the part of analysts like me about concentration in a range of sectors, including health insurance.”

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Bruce A. Scott, the former immediate president of the American Medical Association, said that when the dominant insurer of his state of Kentucky renegotiated his contract with his medical group, he offered rates below what he had paid six years before. “This same type of financial compression game is nationwide, and its frequency has been exacerbated by the consolidation of the health insurance industry,” he wrote in The hill in 2023.

What happened to competition? There were once many regional health insurers, said Dafny. But as the costs started to increase, they did not have enough lever to negotiate prices with the providers and remain profitable. Consequently, many were happy to be acquired by large companies. Then, the hospitals and the doctor’s offices merged to obtain more leverage against the greatest insurers. Now there is a lot of concentration between supplier groups and insurers.

“None of this has nothing to do with the best patient care,” she says. “It had to do with the test of getting there.”

In a declaration in Time, Blue Cross Blue Shield of Alabama said that it worked to make the prior authorization process more transparent and reverse the requirement of prior authorization for certain network medical services. He will try to respond at least 80% of requests for prior authorization in time almost real by 2027, he says. (A coalition of major health insurers has recently promised to repair their previous authorization processes under pressure from the federal government.)

The insurer also says that it hosts competition. “We know that Alabamians have a choice when it comes to choosing their health insurance company and we are not careful for granted,” a spokesperson said in the press release. On the commercial market and subscribed – which represents most of its activity – Blue Cross Blue Shield Alabama is in competition with four other companies that sell individual, family and group plans, depending on the company, and it is in competition with 68 companies that sell Medicare plans in Alabama. Its success in the state is partly because it sells policies in all the counties of Alabama, says the insurer, while others not.

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The other victims of such a concentrated health insurance market are hospitals and rural suppliers. Small rural hospitals are often independent and have not merged with other systems like many of their large urban counterparts, they therefore find it even more difficult to negotiate with the only great insurer of the State, said Harold Miller, president and chief executive officer of the Center for Healthcare Quality and Payment Reform, a national political center that studies health costs. This means that major insurers will often refuse to cover procedures or pay prices below services.

“I had rural hospitals who told me that they can’t even get the health plan on the phone,” said Miller.

Over the past decade, the Ministry of Justice has arrested certain mergers, but has not been very aggressive to stop consolidation in the health care industry, says Dafny. This may be partly due to the fact that the courts require a high level of evidence to block a transaction, and the government could have feared that it has lost the cases it has brought.

Some factors prevent insurers with a monopoly on driving too high costs, explains Benjamin Handel, professor of economics at the University of California in Berkeley who studies health care. One is a regulation called a minimum loss ratio which essentially obliges insurers to spend a certain part of what they earn bonuses for medical care. Another is that an insurer with a monopoly that drives consumers could draw the attention of regulators, he said.