GAO report finds reduced competition in insurance markets is associated with higher premiums and profits

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After pages of disclaimers and cautions that there is not enough good research on the issue, a recent GAO report finds evidence that there has been increasing concentration in health insurance markets in the US. Market share of the top five insurers rose from 43.2% in 1994 to 49.9% in 1997. The impact varied by region with some experiencing no effect and some with increases that are “significant enough to raise antitrust concerns.” Studies generally found that more competitive markets were associated with lower premiums, and lower insurance company profits, but the impact on provider rates was mixed. Greater competition was associated with lower utilization of inpatient services; the impact on outpatient services was unclear. There is no consensus on the effect of competition on quality of care. It appears that conservative economists were right – competition is good.
Ellen Andrews