Most industries have an efficient scale. Based on commonly available technology, management processes and cost of raw materials, a competitive industry will shake out into firms of roughly comparable size. For some industries, the efficient scale is a significant percentage of the market. For example there are only so many car companies. Health insurance companies tend to compete at a state level. Some of this is driven by the structure of the Blues.
A competitive market of 'price-takers' will produce the most of a product and charge the least. A monopoly, or price-setter, will produce less of a good and charge the most. An oligopoly is somewhere in between.
In any event, you're really looking at 50 state sized oligopolies. Which is probably worse than one national monopoly, certainly worse than a national oligopoly. I'm guessing that with national competition you would see many fewer firms and a lot more insured people. Which kind of sucks if you're an insurance executive.
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