Will Fewer Players Hurt NH?

New Hampshire’s health insurance market has always been heavily concentrated among a handful of big players, a situation that will likely be exacerbated by the $54 billion merger of Anthem and Cigna. A recent report from the American Medical Association noted the merger would make NH’s health insurance market one of the least competitive in the country.  

Using a measure of competition called the Herfindahl Index, which accounts for the number of competitors and the market share of each, the study noted that of all the states in which Anthem and Cigna do business, NH would experience the single largest decrease in competition.

Could increasing market power mean more successful price negotiations with health care providers that might result in savings for consumers? Or alternatively, could increased market power reduce choices when it comes to insurance products and result in higher premiums?  The answer depends heavily on whether you think NH’s market is already uncompetitive and on the relative market power of insurance companies versus the provider market.  

What is a Competitive Market?
To answer that we need to go back to the Herfindahl Index. The index ranges from 0 to 10,000—the lower the number, the more competitive the market. A market with a Herfindahl index above 2,500 is considered concentrated, or not competitive.  

By that definition, the NH insurance market has never been particularly competitive. Back in 2007, when Anthem had approximately 57 percent of the market share, the NH Herfindahl index read 4,000.  

In 2013, according to reports from the NH Department of Insurance, there were approximately 30 insurers offering health insurance coverage in NH. Three of those insurers accounted for the lion’s share of the business: Anthem (with 38.6 percent of the covered lives); Cigna (26.4 percent); and Harvard Pilgrim (23.5 percent). Taken together, this translated into a Herfindahl Index of 2,800, which is still not particularly competitive.  

NH’s Provider Market  
Recent data is not readily available to measure competition in NH, but in 2009 the Center developed Herfindahl Indices for each of the 26 NH acute care hospitals. That data suggests the provider market was similarly non-competitive. Looking at both inpatient care and outpatient services, there was not a single NH hospital market that was considered competitive, with index values ranging from 3,500 to over 9,000.  

That is not to say that hospitals didn’t compete for individual services, but rather that overall, the geography of NH has fostered systems of care with significant market concentration. Across the country, there has been significant hospital consolidation and NH is no different.  

Formal consolidations have and are occurring between hospitals in the northern part of the state. Strong affiliations have also been created between Dartmouth and rural hospitals, and there are constant conversations among the larger organizations to the south about service-based collaborations.

What does this mean for NH consumers? Negotiating power among providers and insurance companies will certainly change with the merger. The insurance market going forward will be as concentrated as the hospital markets across the state.  

Predicting the implications of these changes on costs, choice and benefit design, though, is nearly impossible.  It is certainly possible increased power in the insurance sector could result in lower negotiated prices, which could lead to lower premiums. But historically, whether looking at the steel industry or the health care industry, market consolidation has resulted in price increases.  

Given this uncertainty, it is likely that the health care policy conversation will increasingly turn to issues of anti-trust. The NH Insurance Department reviews health insurance premium changes in NH, but only for the group and individual markets, not for the self-insured market. That leaves a significant portion of the insurance market relatively unregulated, and it's a part where Cigna has held a large part of the market. That does not mean that there is no regulatory review. The merger falls under the regulatory oversight of the U.S. Department of Justice. The increasing consolidation of the health care market means the NH Attorney General’s Office and the U.S. Department of Justice will likely become an increasingly important player in the health policy conversation.

Steve Norton is executive director of the NH Center for Public Policy Studies, a nonprofit, non-partisan organization in Concord. Norton can be reached at snorton@nhpolicy.org.