When most small businesses go shopping for employee health insurance in Chattanooga, there are only a couple of choices.
"For employers with less than 50 employees in Chattanooga, the only real options are BlueCross (and BlueShield of Tennessee) and UnitedHealthcare," said Russ Blakely, a local insurance broker for the past 33 years. "For employer groups with more than 50 employees, you also bring Cigna Healthcare into the market, but those are really the only options in this market."
Although the state licenses 27 companies to offer some type of health insurance in Tennessee, a handful control most of the market and just two or three control most of the commercial market, according to a American Medical Association study.
In the AMA's view, such concentration limits competition, drives up premiums and cuts payments to doctors, hospitals and other providers.
"When market power is exercised by health insurers, it adversely affects health insurance coverage and health care," said Dr. David Emmons, director of economic and health policy at the AMA.
"It appears that consolidation has resulted in the possession and exercise of health insurer monopoly power -- the raising and maintaining of premiums above competitive levels -- instead of enhancing efficiency and passing any benefits of consolidation such as lower premiums to consumers."
Officials for Tennessee's BlueCross plan dismissed such claims.
"Most businesses annually make a choice of their health insurance carrier," spokesman Roy Vaughn said from the insurer's Chattanooga headquarters.
BlueCross BlueShield plans are the dominant providers of commercial health insurance in the region:
Alabama: BlueCross of Alabama has 93 percent of the commercial insurance market; UnitedHealthcare has 3 percent.
Tennessee: BlueCross of Tennessee has 70 percent of the commercial market; UnitedHealthcare has 11 percent.
Georgia: WellPoint (the BlueCross plan in Georgia) has 49 percent of the commercial market; UnitedHealthcare has 17 percent.
Chattanooga: BlueCross of Tennessee has 63 percent of the commercial market; UnitedHealthcare has 11 percent.
Cleveland, Tenn.: BlueCross has 76 percent of the commercial market; UnitedHealthcare has 10 percent.
Dalton, Ga.: WellPoint has 76 percent of the commercial market; Alliant Health Plans has 16 percent.
Source: American Medical Association
The share of commercial business held by the top two commercial insurers in each state:
1. Alabama, 97 percent
2. Hawaii, 96 percent
3. Alaska, 93 percent
4. Rhode Island, 91 percent
5. Iowa, 89 percent
6. South Carolina, 84 percent
7. Mississippi, 82 percent
8. Tennessee, 81 percent
Source: American Medical Association
"That means we have to compete every year for our business. The market share that we have is what we have won through competition based upon the service we provide to our customers."
The report from the AMA shows Tennessee's biggest health insurers had the greatest gain in market share of any state other than Florida in the most recent two-year period for which data is available.
AMA researchers said the share of Tennessee's commercial medical insurance market controlled by BlueCross and UnitedHealthcare jumped from 61 percent in 2006 to 81 percent in 2008.
The study found that BlueCross and UnitedHealthcare had a combined market share of 70 percent or more in six of Tennessee's 10 metropolitan areas, including Chattanooga and Cleveland.
A 2008 study showed that just one metropolitan area in Tennessee had such a highly concentrated health insurance market.
BlueCross said it retains more than 90 percent of its customers each year when health plans are renewed.
The average physician group contracts with more than 10 insurers in Tennessee, which Vaughn said proves "this is a highly competitive market."
In Georgia, the BlueCross plan owned by WellPoint also is the dominant health insurance carrier. But Wellpoint has only 49 percent of the commercial market in the Peach State, followed by UnitedHealthcare with 17 percent.
According to HealthLeaders Interstudy, a Nashville-based health care consulting firm, BlueCross' membership of 1.6 million Tennesseeans represents about 43 percent of the overall insurance market in the state.
Josh Kelley, assistant director for managed markets analysis at HealthLeaders, said there are fewer health insurance carriers because of consolidation and the need to build adequate provider networks at the right price in each market.
"The more companies that are out there, the more competitive is the landscape, and that should help give consumers more choice and a better price," Kelley said. "If you are a physician in Tennessee, you obviously want to be in the BlueCross network and you have less room to negotiate with BlueCross than you might with a smaller competitor."
With more than 1 million members, UnitedHealthcare has grown into Tennessee's second biggest health insurer, in part, through acquisitions.
UnitedHealth Group, the parent company, boosted its market presence in 30 states by buying the medical insurance business exited last September by Principal Financial Group. After spending $4.3 billion on acquisitions in 2008, UnitedHealth Group paid nearly $630 million in 2009 to buy the operations of rival Health Net in New England.
The AMA wants the U.S. Department of Justice and the Federal Trade Commission to take a tougher stance against such mergers and acquisitions. Among more than 500 industry mergers, only four have been challenged by antitrust regulators, AMA spokesman Robert Mills said.
But Vaughn said health insurance companies and rates are regulated by states and federal health care reform will give states even more control over both.
BlueCross regularly negotiates discounts with health care providers based upon its volume of customers. Such discounts, Vaughn said, help hold down premium rate increases for employers.