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The market for health insurance is becoming less and less competitive, a new study shows. And fewer choices means higher costs for consumers, many of whom are already struggling to afford their premiums.
Here’s why Americans are so short on options and what you can still do to keep your health care costs low.
Few insurers dominate
Almost three-quarters of metropolitan areas in the country are suffering from low competition, according to the latest report from the American Medical Association (AMA).
In fact, individual insurers often dominate their local fiefdoms, controlling 50% market share or more. That’s the case in almost half the country.
“These markets are ripe for the exercise of health insurer market power, which harms consumers and providers of care,” the study says.
The problem is largely the result of health insurers merging with or buying out their competition. While the government sometimes stops these moves — like it did in 2017 when Anthem tried to buy Cigna to become the biggest health insurer in the country — many more go through.
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When an insurer dominates a market, AMA says, premiums are higher and the quantity of coverage is lower.
Since 2011, average family premiums for employee-sponsored health insurance plans have jumped 47%, a survey from the nonprofit Kaiser Family Foundation (KFF) says. That’s more than wages (31%) or inflation (19%).
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Some states have it worse
Millions of Americans who don’t get coverage through an employer or a government program like Medicare can pick and choose their insurer through the Affordable Care Act (ACA) marketplace.
However, depending on where they live, they won’t exactly have a wealth of options for what's still commonly known as Obamacare.
A recent study found states have an average of five insurers each — up from a low of 3.5 in 2018 but below the peak of six in 2015.
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Delaware only has one insurer offering plans on the state’s health insurance marketplace. In another 13 states, there are only two.
And insurers typically don’t participate statewide. Rural areas tend to have fewer insurers.
What can you do if you don’t have many options?
With marketplace open enrollment ending Jan. 15, now is the time to get to work. Start by investigating whatever options you do have for affordable coverage.
Even if you’re only looking at a few insurers, that can mean a lot of different plans — so consider using a quote comparison site to quickly find cheap health insurance.
Next, you’ll want to look for other ways to save money to afford to offset your high insurance premiums.
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Score a lower mortgage rate. Borrowing costs are still historically low. By refinancing, homeowners may be able to save hundreds of dollars each month and thousands over time.
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Slash high-interest debt. Anyone who has relied on credit cards to get through the pandemic should consider rolling that high-interest debt into a consolidation loan. That may be able to reduce the amount of interest paid and wipe out lingering debt faster.
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Stop overpaying online. No family, however frugal, can avoid shopping regularly for household essentials. However, a free browser extension can scour the internet for lower prices and coupons before checkout.
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Take a low-stakes approach to investing. Participating in the runaway stock market isn’t just for the rich and powerful. Ordinary Americans can earn their own returns using a popular app that invests “spare change” from everyday purchases.
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Nancy Sarnoff is a freelance contributor with Moneywise. Previously, she covered commercial and residential real estate for the Houston Chronicle where she also hosted Looped In, a podcast about the region’s growth, development and economy. Her work has been recognized by the National Association of Real Estate Editors and the Society of American Business Editors and Writers.
