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Health plan competition in local markets
1Center for Studying Health System Change, Washington, DC 20024, USA.
Health Services Research
|April 25, 2000
Summary
Local health plans used consolidation, price competition, and diversification to compete. Despite market dominance, challenges remain in sustaining growth and managing broad networks effectively.
Area of Science:
- Health Services Research
- Market Dynamics
- Competitive Strategy
Background:
- Examines the structure of local health insurance markets and strategies of health plans responding to competitive pressures in 1996/1997.
- Utilizes data from Community Tracking Study site visits and interviews with healthcare informants across 12 U.S. markets.
Discussion:
- Local health plans maintained strong market positions despite national competition.
- Plans employed consolidation, geographic expansion, price competition, and product diversification to enhance market share and power.
- Shift away from provider ownership and exclusive arrangements towards broader networks and open-access products was observed.
Key Insights:
- Consolidation and geographic expansion were key strategies for local health plans.
- Price competition and product diversification were utilized to increase market share.
- Purchaser demands for stable premiums and provider choice influenced plan strategies.
Outlook:
- Local plans are evolving into regional players, but sustainability of growth strategies is uncertain.
- Concerns exist regarding maintaining margins and organizational stability while managing broad networks.
- Future success depends on balancing growth with financial health and effective care management.