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How does health insurance concentration affect prices?


The Affordable Care Act marketplaces have led to a bunch of new research. One study out this month looked at concentration of hospitals and insurance plans in New York and California.

The research on hospitals is pretty clear: fewer hospitals in a region means higher premiums.

But on a different metric, results varied state to state: the concentration of insurance plans available in a region didn’t have the same impact on insurance prices.

Researchers found that when New Yorkers had fewer options for plans, they paid more for health insurance. But for Californians, it was the opposite. Fewer options there led to lower insurance rates.

Why? Well, in both states, insurance companies have to get their rates approved. But California goes a step further.

“What California did in addition to what New York does is that it said, not everybody gets to play in the marketplaces,” said Sherry Glied. Glied is a health economist at NYU and co-wrote the study in Health Affairs that looked at each state’s Obamacare marketplace.

California limits the number of plans that can sell on its exchange, so insurance companies have to compete for those spots. This built-in competition, the researchers think, kept prices lower there.

But Glied said that these are conclusions are based on one year of data and two states. It doesn’t mean New York State should change its regulatory system in order to get lower premiums.

“There are also a number of people who believe it’s important to just let anybody [play] who wants to. And that would be a fairer and perhaps more innovative insurance market,” Glied said.