The Impact of Access Regulation on Health Insurance Market Structure. A. Group Health Insurance Markets


Group major medical insurers in the US – including commercial insurance, Blue Cross and Blue Shield plans, and HMOs – wrote approximately $145 billion in earned premiums in 1997. HMOs wrote nearly 45 percent of this business, followed by Blue Cross and Blue Shield plans (36 percent) and commercial insurers (19 percent). Between 1995 and 1997, total earned premiums aggregated across all states rose 19 percent, reflecting high growth in earned premiums in some states (Alaska, Georgia, Indiana, New York, North Carolina, and Wyoming) and modest declines in a few.2

The number of insurers per state varies dramatically among the states: in 1996 Texas had 94 insurers writing group coverage, while Alaska had 14. On a population-adjusted basis, the number of insurers per state is somewhat more equal: smaller population states and states where commercial insurers hold a larger share of the market typically have more insurers writing business. In 1997, Delaware, South Dakota and Wyoming had the largest number of insurers per capita; while California, New York, and Texas had the fewest (see Figure 1).

Between 1995 and 1997, the distribution of the group market among types of insurers changed in important ways. The number of insurers, multiplied by the number of states in which they wrote business, grew nearly 4 percent (see Table 6). Most of this growth was a result of the formation of new HMOs and existing HMOs expanding into new states; during this period, the number of HMOs writing group coverage, multiplied by the number of states in which they wrote business, increased 22 percent. HMOs’ aggregate market share rose nearly 3 percentage points, largely at the expense of Blue Cross and Blue Shield plans, despite significant activity among BCBS plans that resulted in a net increase in the number (including BCBS HMOs) writing coverage. Nevertheless, in the aggregate, Blues plans lost market share. In contrast, the commercial market very nearly maintained market share (contracting less than a point). However, the number of commercial insurers declined: some insurers merged, and in some states they exited.

In most states, the group health insurance market is highly concentrated: in 31 states, the largest three group insurers hold more than one-half of the market; in all but seven states,3 the largest three insurers hold at least 60 percent of the market (see Figure 2). Conversely, in all states the smallest 50 percent of insurers hold less than 10 percent of the market.