By Fester
States sometimes are excellent units of analysis. Other times they are nearly pointless as a unit of analysis. And occassionnally, the states in question are Delaware or Rhode Island, and thus the distinction between state and any other unit of analysis is pointless as there is nowhere else to look at.
Health Care for America Now (HCAN) has a series of reports that looks at market concention of major health insurers within each state. The basic findings show that a fifth of the states are have a near monopoly of private insurance, and even more states have effective duopolies. However these reports suffer from a serious flaw in the larger states. They are using the state as a unit of analysis despite the fact that the health insurance market in Austin is quite different than the health insurance market providers in El-Paso, and the insurers for Pittsburgh consider Philadelphia to be out of area and out of network while Philadelphia insurers have the same judgement on medical service providers in Pittsburgh.
Using the state as a unit of analysis leads one to conclude that Pennsylvania has a reasonably competetive private insurance market. There are three major providers (Aetna, Highmark Blue Cross and Blue Shield and Indpendence BCBS) and then numerous smaller providers including a few other Blue Cross and Blue Shield affiliates. The Pennsylvania private provider health insurance market has a Gini co-efficient of less than .30 which indicates on first glance a reasonably competetive market.
Highmark BCBS is the Pittsburgh area Blue Cross insurer while Independence BCBS is the Philadelphia area provider. I, as a resident of Greater Pittsburgh, can not use the large, bulk purchasing power of Independence BCBS to bargain against Highmark for a better premium or rating. Pittsburgh and Philadelphia are different markets despite the fact that we are in the same state. The HCAN report for large states does not recognize that the critical unit of analysis is not the state but the metropolitan area.
If one examines metropolitan statistical areas as the relevant unit of analysis for states with multiple MSAs, than I would wager that the Pittsburgh experience with one dominant provider in the form of Highmark, a decent size secondary provider in UPMC and a scattering of smaller providers would be the norm or it could even be better than most other regions. This is despite reports that Highmark had over half the total health insurance market in Western Pennsylvania (including areas outside of the Pittsburgh MSA) in 2008.
Busting non-natural monopolies and duopolies should lead to improvements in cost, services provided or both.
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