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Politics : A US National Health Care System?
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To: TimF who wrote (9603)9/17/2009 5:30:14 PM
From: Lane3  Read Replies (2) of 42652
 
Competition and Concentration in Health Insurance
from Marginal Revolution by Alex Tabarrok

Many people have bandied about numbers suggesting that the market for health insurance is highly concentrated. Here is the President:
Consumers do better when there is choice and competition. Unfortunately, in 34 states, 75% of the insurance market is controlled by five or fewer companies. In Alabama, almost 90% is controlled by just one company....

But these statistics only include people insured by "insurance companies" even though nationally just over half of all employees get their health insurance from a firm that self-insures. In other words, as John Lott points out, over half of the market for insurance is being left out of these concentration statistics.

Since about half of employees are insured by a self-insurer, concentration statistics--as typically presented --should be cut roughly in half (precise numbers vary by state). Firms that self-insure typically outsource benefits management and claim administration to highly competitive third party administrators. A key fact according to this paper (which is outdated although I wouldn't expect the basic finding to have changed) is that the populations served, the benefits paid and the premiums paid are about the same for firms that self-insure and firms that buy insurance from a health insurance company. Thus, concentration among that part of the market served by health insurance firms appears to be well disciplined by the larger market for self-insurance.
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