Insurance competition lacking in isles

Hawaii has the second least competitive commercial health insurance market in the nation with a single private insurer dominating the industry, an American Medical Association study released last week shows.

The state, which has had just two dominant health carriers for decades, was beaten only by Ala­bama and was followed by Michigan, Dela­ware and Alaska in rounding out the top five markets where an absence of health insurance competition exists, the report said.

Hawaii Medical Service Association, the state’s largest health carrier with more than 700,000 members, insures 65 percent of the overall market and 78 percent in the most prevalent preferred provider organization market.

Kaiser Permanente Hawaii, the second biggest with a membership of more than 200,000, has an overall 22 percent market share and 49 percent share of the health maintenance organization market.

"In far too many states, one or two insurance companies dominate the market, which can hurt patients, physicians and employers," AMA President Ardis Dee Hoven said in a news release. "Without rivals to compete against, a large health insurance company can take advantage of patients by raising premiums and dictating important aspects of patient care."

HMSA spokeswoman Elisa Yadao countered that the dynamics in Hawaii’s health insurance industry hasn’t hurt its residents.

"Hawaii has some of the lowest premiums in the nation and some of the healthiest people," she said. "We also have one of the highest rates of insured residents."

A Kaiser spokes­man would not comment on the study.

State Insurance Commissioner Gordon Ito insists there are choices in Hawaii since there are five insurers in the market.

"The fact that one insurer dominates is a result of individuals and businesses choosing whom they want to purchase health insurance from," Ito said. "From year to year if an individual or business decides to switch, the dominance of one insurer could disappear. We wish consumers in Hawaii do shop and compare. This is one of the key factors in having competition in the marketplace."

Still, one carrier with dominant market power increases the risk of anti-competitive behavior and can place the nearly 60 percent of U.S. physicians who work in small or solo practices at a disadvantage, the AMA said.

"An absence of competition in health insurance markets places a particular strain on physicians in small practices who don’t have the leverage to be equal negotiating partners with large health insurers," Hoven added.

Based on 2011 data, AMA’s Competition in Health Insurance: A Comprehensive Study of U.S. Markets report examined both fully insured and self-insured plans in 386 metropolitan areas representing the 50 states and Washington, D.C.