Health Insurance Costs Rising? Blame Monopolies, Not Patients
A new study found that health insurance premiums increased more rapidly in areas where there were fewer insurance companies, suggesting that insurance monopolies are driving premium rates higher. The research, conducted by Hunter College Professor Jessica Van Parys, focused only on marketplace plans established under the Affordable Care Act (ACA).
Some experts have speculated that premium increases were due to the enrollment of sicker patients after the ACA mandated that everyone buy insurance, but this study does not support this or other alternative explanations.
Van Parys evaluated three possible explanations for the increasing premiums: the health of enrollees, provider market power (hospital groups negotiate higher fees with insurers when they have a larger presence), and a monopoly of insurers.
She found that in 2018, premiums were 50 percent higher in areas with a monopolist insurer, compared to those in areas with more than two insurers. Premiums were 21 percent higher in areas with two insurers compared to areas with more than two insurers.
“All of the results showed negligible associations between health outcomes and marketplace premiums. Similarly, I estimated the relationship between hospital market power and marketplace premiums and found only small associations,” said Van Parys.
“Given that more than 40 percent of all rating areas in states with federally facilitated marketplaces have a single insurer, future premium increases seem likely,” wrote Van Parys in her study. One of the goals of the ACA was to foster competition among insurers, but the consolidation of insurers has reduced competition in many areas of the country. “If insurers that offer plans in the marketplaces consolidate and gain market share, then premiums may continue to rise,” she said.
Van Parys sees a glimmer of hope. After years of pulling back, there are signs of insurers expanding into some marketplaces, she said.
Jessica Van Parys (Assistant Professor, Economics) | Profile 1
Colleges and Schools
“Market concentration tied to higher premiums in ACA markets” (Healthcare Dive)