Hawaii is the second least competitive commercial health insurance market in the nation, according to a study released Wednesday.
A report by the American Medical Association, which represents physicians nationwide, ranked the state only below Alabama, citing the health insurance market dominated by just two carriers, the Hawaii Medical Service Association and Kaiser Permanente Hawaii. Combined, the companies insured more than 90 percent of the market in 2010.
The study points to increased premiums, reduced benefits and insurers’ growing profits to argue that highly concentrated markets are harmful to both patients and physicians.
"The concern is that when you have that kind of consolidation of market power it tends to decrease the ability of physicians to negotiate with health plans for both the patient benefit and their own," said Jeremy Lazarus, president of Chicago-based American Medical Association. "The same holds true for hospitals. When you have more competition in the market, that would drive innovation in patient care and also more efficiency. In other words, there’s going to be more motivation for health plans to compete both on quality, innovation, efficiency and pricing."
Besides HMSA and Kaiser, University Health Alliance and Hawaii Medical Assurance Association compete in the small to medium-size employer market. All four are nonprofit insurers.
"While the study makes ominous predictions about a lack of competition, that is not the case in Hawaii. We often perform better in key health areas than states on the mainland," said HMSA spokeswoman Elisa Yadao. "We have a very low rate of uninsured residents and scored No. 1 overall in the Gallup Healthways Well-Being Index again this year. Hawaii has among the lowest average family premiums in the nation. At HMSA, we have competitive rates while offering benefits that are often more extensive than mainland plans."
A Kaiser spokeswoman declined comment. State Insurance Commissioner Gordon Ito could not be reached for comment.
The report, which surveyed 385 metropolitan areas in all states and Washington, D.C., found a significant absence of competition in 70 percent of the areas surveyed.
"In the past, there have been a number of commercial for-profit insurers that have attempted to compete in Hawaii’s marketplace but because of the premium tax that they had to pay and their administrative expense, which was much higher than HMSA’s, they determined that they could not compete," said Paul Tom, president of Benefit Plan Solutions Inc.
Meanwhile, the state is preparing to launch its first online health insurance exchange, with which consumers can compare health plan benefits and pricing. The exchange could spur increased competition, said Sen. Josh Green, who is a physician.
"It’s not a surprise at all we have one dominant insurer. There’s no question that our geographic isolation contributes to that," he said. "We’re such a small state, it’s very difficult for insurers to invest resources and come here. It doesn’t mean we can’t have some niche insurers that focus on certain small businesses, certain health populations. Competition’s always good. A little healthy competition makes everyone sharper."
