One health insurer has at least 30% market share in virtually all of the nation’s major markets. This finding, published in the AMA’s “Competition in Health Insurance; A comprehensive study of US markets”, indicates that the market’s consolidation has resulted in a monopsony wherein there are few buyers (in this case of provider’s services) and many sellers (again, in this case, providers).
The market is even more consolidated than the above statistic indicates; in 56% of the markets studies, one health plan has over 50% market share, and in one of five markets, a single health plan controls over 70% of the market.
This makes for a small group of companies controlling the buying and selling of health care; they have created a monopsony on the buying end and an oligopoly on the selling end.
What does this mean for you?
US health care may be devolving to a not-quite-single payer system; with three plans dominating the marketplace, providers have little control over selling their services, and health plan purchasers have few sources from whom to buy their health insurance.
The health care market does not lend itself to new entrants as barriers to entry are quite high. Provider contracts are required, and without market share, providers won’t give meaningful contracts. And without meaningful contracts, employers won’t sign up.
So new entrants are stuck in a Catch-22. The result – continued market consolidation, leading to fewer options for providers (sellers) and employers (buyers).
While the “market” may be working here, the result is likely unfavorable for both providers and employers. Wealth is indeed being created at the health plan level, but at the expense of their suppliers and customers.
The net is this. Is it acceptable to allow companies to exert this level of control over health care ?