While no one was looking, nine big insurers grabbed 76.7% of privately-insured patients!
Consolidation of major health insurance companies in recent years is a trend which reinforced the market clout of the nation’s two largest lab companies at the expense of local laboratories and pathology groups. However, few pathologists and clinical lab managers know precisely how much market power is currently concentrated into the hands of only a few health insurance companies.
Dark Daily now unveils a remarkable analysis. At this moment, just nine companies control 76.7% of all privately-insured individuals in the United States! Moreover, the three biggest of these health insurance firms—UnitedHealth Group, WellPoint, and Aetna—collectively cover 85.6 million of the185 million Americans enrolled in private health plans. That’s 48.3% of the total U.S. market.
As shown in the table below, when the other six companies are added—Humana, HealthCare Service Corp., Cigna Group, Kaiser, Highmark and Health Net—the nine biggest health insurers cumulatively insure 141.9 million of the 185.1 million Americans with private health insurance—or 76.7% of the total.
TABLE: Showing Market Concentration of
Privately Insured Individuals in the United States
| Rank | Total Enrollment1(Millions) | Cumulative | Percent | Cumulative % | |||
| 1) | WellPoint |
35 |
35 |
18.9% |
18.9% |
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| 2) | UnitedHealth Group |
32.9 |
67.9 |
17.8% |
36.7% |
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| 3) | Aetna |
17.7 |
85.6 |
9.6% |
46.2% |
||
| 4) | Humana |
14.8 |
100.4 |
8.0% |
54.2% |
||
| 5) | HealthCare Service Corp |
12.4 |
112.8 |
6.7% |
60.9% |
||
| 6) | Cigna Group |
12.0 |
124.8 |
6.5% |
67.4% |
||
| 7) | KFHP (Kaiser Foundation) |
8.6 |
133.4 |
4.6% |
72.1% |
||
| 8) | Highmark |
4.8 |
138.2 |
2.6% |
74.7% |
||
| 9) | Health Net |
3.7 |
141.9 |
2.0% |
76.7% |
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| Total of Top Nine Insurance Firms |
141.9 |
141.9 |
76.7% |
76.7% |
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| Total of All Privately Insured Individuals2 |
185.1 |
|
100.0% |
100.0% |
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| 1 Source: Company filings, public sources |
2 Source: “The Uninsured, A Primer”, October 2008, Kaiser Family Foundation |
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Consolidation in the managed care industry has made it easier for these nine companies to negotiate exclusive provider contracts with the national laboratories—while excluding many regional and local laboratories from their provider networks. This table powerfully illustrates why it is important for local labs and hospital outreach programs to have access to these private health insurance beneficiaries—or be locked out of a major share of the total marketplace.
Does this stifle competition? Some experts argue that insurer consolidation has played a major factor in allowing these big health insurers to charge higher premiums to employers while arbitrarily reducing reimbursement to providers, including physicians, hospitals, and laboratories. In fact, it was four years ago, in an industry publication, when James Robinson, Ph.D., a professor of health economics at the University of California, Berkeley School of Public Health, predicted that the government would eventually get involved to break insurers’ run of “double-digit profits, earnings, and equity share prices.
“We have a philosophically dominant tone in the country that nongovernmental solutions are preferred. … They [Congress] are going to try other things first,” he noted at that time in an interview with Medscape.com.
Robinson reported that health insurance industry profits outpaced increases in healthcare costs, as premiums increased by 10% to 15% annually while unprofitable business was dumped. Aetna, for example, improved its profit-to-cost ratio to boost stock prices, from $19 per share in 2000 to $126 per share in 2005, even as it cut off seven million enrollees.
“Health insurers have been very successful about not fighting for market share among themselves and by building up their margins,” stated Robinson. “That gets back to consolidation: With a small number of competitors, it’s easy to maintain an implicit agreement not to be aggressive in reducing premiums to gain market share. Everyone raises premiums at more or less the same rate. That’s what they’ve done, and they’ve been successful at it. In the past five years, the [health insurance] industry has been the most profitable at a time of great strain on the medical system,” he said.
For pathologists and clinical lab executives, the ramifications of this market consolidation can be seen as local laboratories find themselves excluded from important managed care provider networks in their communities. It denies these local labs access to serve privately-insured patients.
Moreover, the “Top Nine Health Insurers” table above shows why it is important for local laboratories and pathology groups to be persistent in gaining provider status with as many of these nine companies as feasible. After all, if well-known bank robber Willie Sutton robbed banks because “that’s where the money is,” labs should want to gain managed care network provider status with these nine insurers because “that’s where the privately-insured patients are!”
PLUS THIS NEWS ADDENDUM!
On June 20, UnitedHealth Group (NYSE:UNH) announced that it would acquire certain health plans owned by Health Net Inc. In a deal valued at $450 million, UnitedHealth will assume the Health Net base of 578,000 members in Connecticut, New York, and New Jersey. This continues the consolidation trend among managed care companies, eliminates a competitor to UnitedHealth in selected markets, and adds to the number of privately-insured enrollees controlled by the nation’s nine largest health insurance companies.
Related Information:
Effects of Health Insurer Consolidation: A Newsmaker Interview With James C. Robinson, PhD (membership site)
Why We Need a Public Health-Care Plan
UnitedHealth to buy some Health Net operations
