By Richard M. Scheffler, Eric R. Kessell and Margareta Brandt | Published in October 2015 in the Journal of Health Politics, Policy, and Law | Link to Full Article
We explain the establishment of Covered California, California’s health insurance marketplace. We describe the market shares of health plans in California and in each of the nineteen rating regions. We examine the empirical relationships among measures of provider market concentration, health plans, and the variation in premiums across the rating regions. We found that the concentration of medical groups and hospitals was positively associated with the variation in Covered California premium rates in the rating regions while the concentration of health plans is not statistically significant. We estimate the impact of reducing hospital concentration to levels that would exist in moderately competitive markets. This produces a predicted overall premium reduction of more than 2 percent. However, in three of the nineteen rating regions, the predicted premium reduction was more than 10 percent. These results suggest the importance of provider market concentration on premiums.