Smart Benefits: RI Among Worst States for Competitive Healthcare
Monday, April 08, 2013
Rhode Island has just three commercial health insurance carriers: Blue Cross & Blue Shield of Rhode Island, with 55% market share; UnitedHealthcare of New England with 30%; and Tufts Health Plan, the newer entrant trying to build its presence. This lack of competition earns the state the number eight spot in the top ten states with the least competitive health insurance markets, according to a recent report from the American Medical Association (AMA).
RI Says No to HMO
The study looked at HMO, POS and PPO markets. Rhode Island finished first among states with the least competitive HMO markets and second among the least competitive POS markets. These results aren’t surprising: the majority of health plans sold in Rhode Island, regardless of carrier, include PPO networks, even most of the consumer-driven high-deductible plans.
Rhode Island’s health insurance market dynamics date back to the late 1990s when Harvard Pilgrim, most known for its primary-care driven HMO models, withdrew from the Rhode Island market for financial reasons. Its HMO model never caught on here like it did in MA, partially because Rhode Island’s a strong union state, and many unions wouldn’t agree to single offering HMOs in their collective bargaining agreements.
Almost 15 years later, however, with healthcare reform renewing emphasis on the importance of primary care, carriers are fast rolling out products that tier or limit access to certain providers, while requiring a relationship with a PCP.
Does Dominance Drive Price Hikes?
In its study, the AMA pointed out that there are many states where one insurer has more than 50 percent market share, like Rhode Island, which can contribute to lack of competition and theoretically drives up prices. But the health insurance industry doesn’t agree.
According to America’s Health Insurance Plans (AHIP) research, it’s provider consolidation that’s behind rising costs. It’s true that we’re witnessing massive consolidation with physician practices – and some are even being gobbled up by large healthcare delivery systems that include hospitals. Locally, there’s concern that, with just a few giants left to negotiate on both the healthcare delivery side and the insurer side, competition will be further limited and premiums will cost more.
No Matter How Many Carriers, Costs Still Rise
Even in states where there’s more competition, costs are still high. Neighboring Massachusetts and Connecticut have more insurer competition than Rhode Island, but they also wrestle with providing affordable care. In fact, Massachusetts has conceded that its Health Connector, which allows compare options from the major insurers in Massachusetts, has improved access to care for individuals, but hasn’t corrected for costs.
The current healthcare reform climate probably creates more barriers to entry than opportunities for new markets. Carriers are cautiously evaluating whether they will participate in public exchanges, as not all will. In some states they are being forced to participate if they want to sell to the small group market. Carriers like Aetna and Empire Blue are saying no to some markets and yes to others. And large national carriers, like the biggest player, UnitedHealthcare, have the resources and market share to grow amidst a sea of exchange.
If anything, the trend is toward less carriers, not more. More employers are choosing self insurance to gain more control, and others are expected drop insurance once 2014 arrives. This brings new dynamics and new types of competition to the table. Both carriers and health systems will need to be innovative, work together and address affordability in new ways if they want to continue to grow.
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