Report Shows Small Businesses Lack Choices in Health Insurance Market

From the Office of U.S. Senator Dick Durbin

[WASHINGTON D.C.] – Assistant Senate Majority Leader Dick Durbin (D-IL) and Senators Olympia J. Snowe, Ranking Member of the Senate Committee on Small Business and Entrepreneurship, Christopher S. Bond (R-Mo.) and Blanche L. Lincoln (D-Ark.) today announced the release of a Government Accountability Office (GAO) report that highlighted a lack of competition in the small group health insurance market, leaving American small businesses with few choices when it comes to securing meaningful, affordable health care coverage options for their employees. The lawmakers requested the report from GAO, which confirmed the consolidation of the small group health insurance marketplace has increased markedly. Specifically, the report found that the five largest carriers in the small group market, when combined, represented at least three-quarters of the market in 34 of the 39 states responding to the survey, and they represent 90 percent or more in 23 of these states.

“Competition is crucial to making health insurance more affordable for small businesses,” said Senator Durbin. “But in my home state of Illinois, competition is scarce – the five largest insurance companies own eighty-two percent of the market. Nationwide, this problem is growing and health insurance is becoming increasingly unaffordable for small business owners. I plan to join with Senators Snowe and Lincoln to reintroduce legislation – The Small Business Health Options Program (SHOP) Act – that will increase competition and bring down the cost of health insurance for small businesses. As uncertainty about our economic future remains, I hope Congress will make this legislation a priority during the health care reform debate.”

“Access to affordable health insurance remains a top concern for small businesses in Maine and across the country, and this GAO report provides stark data highlighting the challenges we still face in confronting this crisis,” said Senator Snowe. “The sad truth remains that small group insurance markets continue to lack real competition among insurers. No competition means higher costs, and higher costs translate to no health insurance. That’s why I am working with Senators Durbin, Lincoln, and others to re-introduce the Small Business Health Options Program Act, or SHOP Act. This legislation would inject much-needed competition into dysfunctional insurance markets, and provide a range of affordable new coverage options for small businesses and the self-employed.”

“It’s Economics 101, less competition in health insurance will mean fewer choices and higher costs,” said Senator Bond. “Congress should act now to make it easier for our small businesses to provide workers and their families with health insurance.”

“The majority of uninsured Americans are self-employed individuals and employees of small businesses,” Senator Lincoln said. “I’ve heard from several small business owners in Arkansas who desperately want to offer health insurance to their employees because they know it helps with recruitment, retention, employee performance, and the overall success of the business, but they have found it increasingly unaffordable. Our bipartisan SHOP bill will allow us to begin to address the needs of the millions of working uninsured Americans whose top priority is access to quality and affordable health care for their families.”

The GAO report found that:

• The median market share of the largest small group carrier has increased to about 47 percent in 2008 from the 43 percent reported in 2005 and the 33 percent reported in 2002. Twenty-four of the 29 states providing information in both 2002 and 2008 saw increases in the market share of the top carrier that ranged from about 2 to 39 percentage points.
• The number of states with a combined market share of the five largest carriers of 75 percent or more has also increased since our 2002 survey. The combined market share of the five largest small group carriers represented three-quarters or more of the market in 34 of 39 states, compared to 26 of 34 states reported in 2005 and 19 of 34 states reported in 2002.
• Finally, the median market share of all the Blue Cross and Blue Shield carriers in 38 states reporting this information in 2008 was about 51 percent, compared to the 44 percent reported in 2005 and the 34 percent reported in 2002 for the 34 states supplying information in each of these years.

To view a complete copy of the report visit: www.gao.gov.