The state's two largest health insurers tightened their grip on the Louisiana market in 2016, as their combined share grew slightly to 82 percent, according to a new report from the American Medical Association.
Blue Cross and Blue Shield of Louisiana had 67 percent of the market and UnitedHealth Group 15 percent, according to "Competition in Health Insurance: A Comprehensive Study of U.S. Markets." In 2014, Blue Cross had 66 percent of the market and UnitedHealth had 14 percent.
In Baton Rouge, Blue Cross held 68 percent of the market while UnitedHealth had 11 percent in 2016. In New Orleans, Blue Cross held 55 percent of the market while UnitedHealth had 23 percent. In Lafayette, Blue Cross had 70 percent of the market, while UnitedHealth had 12 percent.
Louisiana was the fifth-least competitive state for health insurance, trailing only Alabama, Delaware, Hawaii and South Carolina, according to the report by the national organization of physicians. High market concentration tends to lower competition among commercial health insurers, a fact borne out by research. These markets become ripe for health insurers exercising market power, which critics say harms patients by raising premiums above competitive levels.
Insurance Commissioner Jim Donelon, who has been pushing for more competition among health insurers for several years, said the AMA report's results weren't surprising.
The National Association of Insurance Commissioners already considered the Louisiana Blue a monopoly, because the top two insurers have controlled more than 70 percent of the state's market for several years, Donelon said.
"You see it as our ranking has deteriorated for the cost of health insurance for policyholders …. Twenty years ago, we were right at the national average for the health insurance cost for a family of four, as ranked by the Kaiser Family Foundation," Donelon said. "That went the other way post-Katrina."
From 2013 to 2016, an employee's share of the annual average premium for family coverage grew from about 30 percent to 34 percent in Louisiana, according to Kaiser. Nationally, the employee share has remained at roughly 28 percent of the total.
Blue Cross spokesman John Maginnis said the single biggest factor that affects health insurance premiums is the cost of medical care.
As the costs of medical services, treatments and drugs continue rising, premium prices must go up to cover those costs, he said. In 2016, 85 percent of the premium dollars Blue Cross took in paid for customers' hospital care, doctor's office and clinic visits, and prescriptions.
Blue Cross is a not-for-profit and is owned by its policyholders, which allows the company to keep its administrative costs low, Maginnis said. Blue Cross, unlike many of its competitors, did not abandon the individual market. It's just another way the company has shown its commitment to improve the lives and health of Louisiana residents, he said.
Donelon said the impact of market concentration shows up first in health care provider contracts. The larger the market share, the more concessions the insurer can extract from providers.
"I have tried to do what I can through the bully pulpit and lobbying efforts to address the growing dominance of our Blue, fine company that they are," Donelon said. "But those efforts have been frustrated."
Most recently, Blue Cross won the largest book of business in the state, the Office of Group Benefits, Donelon said.
The Office of Group Benefits covers more than 200,000 state employees. Blue Cross administers the claims for OGB under a contract worth about $35 million per year. Altogether, Blue Cross covers 1.6 million Louisiana residents.