Blue Cross/Blue Shield enjoys dominance in Alabama health insurance market
by Patrick McCreless
Nov 29, 2012 | 4445 views |  0 comments | 8 8 recommendations | email to a friend | print
A new national study reports that Alabama has the least competitive commercial health insurance market in the country. Whether lack of competition is a detriment to the health care system, however, is a topic of some debate among health care experts.

Area health experts do not argue the contention that the health insurance market is monopolized, yet they don’t all agree with the report’s suggestion that lack of competition is automatically bad for physicians, hospitals and patients.

The American Medical Association, the largest association of physicians in the country, released the study Wednesday.

According to the report, the health insurer Blue Cross Blue Shield dominates Alabama’s health insurance industry with an 88 percent share of the market. The report also shows that Blue Cross Blue Shield has 90 percent of the market share in the Anniston-Oxford metro area.

In addition, the report states that a significant absence of health insurer competition is present in 70 percent of the metropolitan areas studied across the country.

“It appears that consolidation has resulted in the possession and exercise of health insurer monopoly power,” the study states, pointing to increased premiums, watered-down benefits and insurers’ growing profitability as evidence that highly concentrated markets harm patients and physicians.

“Blue Cross is our payer … it is kind of a monopoly,” said David McCormack, CEO of Regional Medical Center in Anniston.

McCormack said competition is usually beneficial and that the lack of it in the state’s insurance market sometimes hurts RMC’s ability to get better payments for services.

“It does make it difficult when we are the people providing services and someone says ‘here’s what we’ll pay you,’ and you have to take it,” McCormack said. “I think Blue Cross does a good job … but I think competition could help.”

Rosemary Blackmon, executive vice president of the Alabama Hospital Association, said Blue Cross’ control of the market has its benefits and drawbacks.

“While it may make it easier to sometimes to deal with one or two insurers from an administrative point of view, it sometimes makes it difficult in negotiating rates,” Blackmon said.

Dr. Igor Bidikov, an Anniston geriatrician, agreed with McCormack that lack of competition could cause problems in terms of negotiating payment rates.

“From a patient perspective and a hospital perspective, it could make a difference,” Bidikov said.

However, Bidikov added that having basically one major insurer in the state does not impact him as a physician.

“I don’t think it’s a big deal,” Bidikov said. “I’ll always get paid.”

Value vs. cost

In a Thursday email to The Star, Koko Mackin, a spokeswoman for Blue Cross Blue Shield, wrote that her company’s market share is not hurting physicians or consumers.

“We have been serving Alabamians for over 75 years and we have worked hard to earn the trust and confidence of the 2.2 million individuals and families we cover in the state,” Mackin wrote. “Our customers’ faith in us has provided us our market share and we have to continue to earn that every day.”

Mackin noted that Blue Cross’ profit margins for the last five years have averaged less than 1 cent on the dollar, reflecting the company’s goal of delivering value to its customers. Also, Blue Cross returns more than 90 cents in health care benefits for every dollar received from its customers and its 7 percent administration expense ratio is one of the lowest in the country and second among the 38 Blue Cross Blue Shield Plans, Mackin wrote.

“Blue Cross contends it’s able to get market share by doing a good job for insurance shareholders in the state and that’s true,” said Dr. Mickey Trimm, associate professor of health care management at the University of Alabama at Birmingham. “But its market share also creates a very difficult situation for providers to negotiate with Blue Cross on prices.”

Trimm said the report did not reveal anything about the state’s insurance market that the medical industry did not already know. What concerned him about the report, however, was that it did not show a comparison between Blue Cross’ level of services and other insurers across the country.

“It doesn’t show a relationship between premiums and services provided between Blue Cross and others, so we don’t know if we’re getting a good deal out of Blue Cross or not,” Trimm said. “And I’ve never seen any study that shows Blue Cross is paying providers less than others in other parts of the country.”

Competition coming

While Blue Cross clearly dominates the state’s health insurance market, there is a chance it could see more competition in the future. The federal government will soon establish a health insurance exchange for the state as part of the Affordable Care Act health reform law. The exchange will allow residents to buy health insurance at rates normally available only to large employers. The state had the option of creating its own exchange, but Gov. Robert Bentley opted out due to the cost.

“What if the federal government steps in and decides to bring in insurance products not currently available,” Trimm said. “To me, the potential to set up a federal exchange might have some impact on competition.”

Staff writer Patrick McCreless: 256-235-3561. On Twitter @PMcCreless_Star.

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