Chicago's Health Insurance Monopoly

By Sean Stillmaker in News on May 22, 2010 3:00PM

Health insurance reform has been a big talking issue of the year. And it is wake has come an alarming fact: the lack of competition amongst health insurance providers in metropolitan areas. In Chicago Blue Cross Blue Shield covers 66 percent of the market - more than any other provider in a metropolitan area. In 54 percent of metropolitan markets at least one insurer had a market share of 50 percent or more, according to a study by the American Medical Association. “An absence of competition in health insurance markets is clearly not in the best economic interest of patients,” said Dr. Rohack of AMA.

Consumers are prone to premium increases with insurer monopolies. An Oak Lawn dental practice had a 30 percent rate increase, $11,000, when they switched over to Blue Cross Blue Shield, reported Crain’s Chicago Business. And BC/BS might only grow bigger and more powerful with the new health care legislation.

The reforms Congress enacted could further strengthen Blue Cross of Illinois' hand. It's well-positioned to win the bulk of the hundreds of thousands of Illinois residents who will qualify for federal help to buy policies in the individual market, where Blue Cross is especially strong. More small players could fold if they have trouble meeting new requirements aimed at paring insurers' costs.

The Blues' expanding muscle squeezes the bottom lines of medical providers, especially hospitals, many of which have little leverage to negotiate with an entity that often insures more than a quarter of a hospital's patients. That makes it tough for smaller insurers such as UniCare, which lack the heft to negotiate Blues-like payment rates for doctors and hospitals.

The individual insurance market is quickly expanding with unemployment rising. This group can see a rate increase from 8.5 percent to up to 60 percent this year, the Tribune reported. The premium increase for this group sparked a national debate when Anthem Blue Cross of California said they would increase rates by nearly 40 percent in February. The insurer withdrew its plans last week when inspectors found the increase was based on assumptions of increasing medical costs, according to the U.S. Department of Health and Human Services.