HOUSE JOINT RESOLUTION NO. 53 Offered January 9, 2008 Prefiled December 28, 2007 Directing the Joint Legislative Audit and Review Commission to study measures to increase competition in the commercial health insurance market in the Commonwealth. Report. ---------- Patron-- O'Bannon ---------- Committee Referral Pending ----------

WHEREAS, in the American market-based economic model, competition is essential in controlling prices, introducing innovation, and ensuring efficiency; and

WHEREAS, Virginia relies on market competition to provide affordable health insurance options in the commercial market; and

WHEREAS, as in any other market, effective competition in the commercial health insurance market requires active competitors; and

WHEREAS, Virginia currently has one insurer that has a significant stake in the commercial health insurance market in most areas of the Commonwealth; and

WHEREAS, recent reports have raised concerns that the commercial health insurance market in many states, including Virginia, is dominated by a few firms; and

WHEREAS, James C. Robinson, professor of health economics at the University of California, Berkeley, School of Public Health authored a paper published in Health Affairs in 2004 in which he documents that in 2002-2003 in Virginia, the three largest health plans had 80 percent of the commercial health insurance enrollment, which produced a market concentration index as measured by the Herfindahl-Hirschman Index of market concentration (HHI) of 3,519; and

WHEREAS, Dr. Robinson labeled the extent of antitrust concern associated with Virginia's market concentration index as high; and

WHEREAS, in 2007 the American Medical Association released an update to Competition on Health Insurance, A Comprehensive Study of U.S. Markets, which concluded that in the combined health maintenance organization/preferred provider organization product market, 96 percent of the metropolitan statistical areas analyzed are highly concentrated, meaning they have an HHI exceeding 1,800; and

WHEREAS, the American Medical Association's 2007 update reported that the HHI for the combined health maintenance organization/preferred provider organization product market was 2,941 for the Commonwealth, with higher market concentration indices reported for Charlottesville (4,201), Harrisonburg (7,515), Lynchburg (6,717), Richmond (4,398), Roanoke (8,965), and Winchester (5,574); and

WHEREAS, in an attempt to address the lack of health insurance product options available to small employers in the Commonwealth, in 1992 the General Assembly enacted Article 5 (§ 38.2-3431 et seq.) of Chapter 34 of Title 38.2 of the Code of Virginia, which requires that health insurers in Virginia offer to small employers the essential and standard health plan; and

WHEREAS, as Dr. Robinson has concluded, if the American experiment with market-oriented health insurance is to be sustained, the industry must be subjected to renewed rivalry from new product designs and competing firms; now, therefore, be it

RESOLVED by the House of Delegates, the Senate concurring, That the Joint Legislative Audit and Review Commission be directed to study measures to increase competition in the commercial health insurance market in the Commonwealth.

In conducting its study, the Joint Legislative Audit and Review Commission shall (i) determine the extent of concentration in the commercial health insurance market; (ii) analyze the effects of such level of concentration on the cost and availability of commercial health insurance products in the Commonwealth; (iii) identify issues responsible for the extent of such market concentration, such as barriers to entry, provider accessibility, and premium costs; (iv) determine whether the requirement established by Article 5 (§ 38.2-3431 et seq.) of Chapter 34 of Title 38.2 of the Code of Virginia that health insurers in Virginia offer to small employers the essential and standard health plan has increased competition or otherwise improved the availability and affordability of health insurance coverage and, if not, recommend whether the requirement should be repealed; and (v) recommend solutions to address any negative effects found to exist as a result of concentration in the commercial health insurance market.

Technical assistance shall be provided to the Joint Legislative Audit and Review Commission by the Joint Commission on Health Care and the State Corporation Commission's Bureau of Insurance. All agencies of the Commonwealth shall provide assistance to the Joint Legislative Audit and Review Commission for this study, upon request.

The Joint Legislative Audit and Review Commission shall complete its meetings by November 30, 2008, and its Director shall submit to the Division of Legislative Automated Systems an executive summary of its findings and recommendations no later than the first day of the 2009 Regular Session of the General Assembly. The executive summary shall state whether the Commission intends to submit to the General Assembly and the Governor a report of its findings and recommendations for publication as a House or Senate document. The executive summary and report shall be submitted as provided in the procedures of the Division of Legislative Automated Systems for the processing of legislative documents and reports and shall be posted on the General Assembly's website.