To assess market competition in any industry one must begin by identifying the parameters of the relevant market or markets. In the case of health insurance, two key parameters are geographic presence and product line.
Geography is a relevant parameter for a couple reasons. First, because most medical services are purchased locally, the prices and quantities of those services, the size and distribution of the patient population, and the contractual arrangements of insurers and providers can all vary by location. Variations in those inputs affect the price of coverage and the extent of insurer competition available to consumers. Second, the regulation of insurance, including most anti-trust regulation, has historically been the responsibility of state governments.
Product line is also a relevant parameter because within the broader market for health insurance there exist discrete submarkets with different types of customers. Thus, the business strategy of any given insurer might range from targeting only a single subset of the broader market to seeking to serve multiple submarkets by offering a number of different product lines.
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