Comprehensive Utah Health Insurance Market Trends

Comprehensive Market Trends

This section reports on four significant trends in Utah's comprehensive health insurance market: the number of insurers, the cost of insurance, the number of insured members, and the financial status of the market. Each measure represents a different aspect of the market's "health."

Trends in the number of insurers. The Insurance Department continues to monitor the number of commercial health insurance companies that are providing comprehensive health insurance. The department has data regarding the number of comprehensive health insurers from 1999 to 2007.

From 1999 to 2007, there was a decline in the number of comprehensive health insurers from 1999 to 2003, followed by a period of relative stability from 2004 to 2006, and ending with a slight decline during 2007. For example, in 1999, there were 123 commercial health insurance companies who reported comprehensive health insurance business during the year. By 2003, this number had declined to 76. There were 76 comprehensive health insurers during 2003 and 2004, followed by an increase of 2 insurers during 2005 and 1 insurer during 2006. As of 2007, there were 74 insurers who reported currently having comprehensive health insurance business in Utah. Although these changes may appear significant, this decline has not affected the competitiveness of the health insurance market.

Under current market conditions, the typical comprehensive health insurer needs to be large enough to be able to drive membership volume to providers in order to remain competitive. While there is no absolute rule for how large an insurer needs to be, an insurer with a large number of members has more leverage in contract negotiations with providers. This arrangement can benefit both consumers and providers. Consumers may benefit from lower prices and providers may benefit from a higher volume of clients. Many small comprehensive health insurers cannot "drive volume" as effectively as a large insurer.

Most of the decline in the number of comprehensive health insurers has occurred primarily among smaller comprehensive health insurers, particularly foreign insurers with less than 1 million dollars in comprehensive health insurance premium. In many cases, these small foreign comprehensive health insurers are providing coverage for "non-situated" policies, that is, commercial health insurance policies that are not filed in the state of residence of the employee. These are often policies issued in another state to an employer with less than 25 percent of their employees living in the state of Utah. The premium is reported as covering a Utah resident, but the policy itself was not sold in Utah or filed with the Insurance Department. Many of these companies are not actively selling health insurance in the Utah health insurance market and are only here because an employee of the company they sold health insurance to is currently a resident in the state. As a result, many of these insurers leave the market when the employees leave the company or the company leaves Utah. Thus, many of these smaller foreign comprehensive health insurers are covering a special class of Utah residents and may not be competing directly in the mainstream health insurance market in Utah. As a result, the decline appears to be due to factors external to Utah's health insurance market and probably has little or no effect on the core of Utah's health insurance industry.

In contrast, there has been little change in the number of large domestic comprehensive health insurers that represent the core of the comprehensive health insurance market. These large comprehensive health insurers account for more than 90 percent of the market and provide a solid pool of comprehensive health insurers. These insurers are financially solvent and provide an important level of strength, stability, and choice for Utah's comprehensive health insurance market.

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