Health Insurance Markets Remain Highly Concentrated in Majority of US

Concentration of health insurance markets in the United States is high and increasing, according to a new report from the American Medical Association (AMA). While concentration in the Medicare Advantage (MA) market decreased slightly, it still remains highly concentrated. On the commercial side, the market got more concentrated from 2014 to 2022.

Higher market concentration, which tends to occur as a result of mergers and acquisitions, often means low competition, which can raise antitrust concerns. In the 2023 edition of Competition in Health Insurance: A Comprehensive Study of U.S. Markets, AMA highlighted the negative consequences of market concentration, mostly in the form of higher premiums.

“Conceptually, mergers and acquisitions can have beneficial and/or harmful effects on consumers,” the AMA noted in its report. “However, only the latter has been observed.”

The report analyzed 381 metropolitan statistical areas (MSAs), all 50 states, and the District of Columbia to evaluate the level of competition in health insurance markets. To understand market concentration, the report utilized the Horizontal Merger Guidelines from the US Department of Justice (DOJ) and the Federal Trade Commission and the Herfindahl-Hirschman Index.

Higher market concentration often means low competition, which has been shown to lead to higher premiums.

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According to the report, 73% of MSA-level commercial markets, 71% of MSA-level MA markets, and 90% of MSA-level public health exchange markets were highly concentrated. While the MA and public health exchange markets had seen a slight decrease from in market concentration from 2014, the commercial market had increased from 71% in 2014.

One health insurer had a market share of least 50% in 48% of the commercial MSAs, 31% of the MA MSAs, and 67% of the public health exchange MSAs.

“High market concentration tends to lower competition among health insurers, which can harm patients by raising insurance premiums above competitive levels,” said AMA President Jesse M. Ehrenfeld, MD, MPH. “The share of markets that are highly concentrated may be far higher than reflected under current federal guidelines. The AMA supports draft federal guidelines that would lower the regulatory threshold for markets to be considered highly concentrated. To reverse the trend toward health insurance consolidation, the AMA strongly supports the proposal as the proper prescription to scrutinize and potentially limit harmful insurance mergers.”

From 2014 to 2022, commercial market shares have largely stayed the same with the top 4 insurers maintaining their rankings at the national level. According to AMA, the national level results “mask the findings at the local (MSA and state) levels. “Health insurance markets are generally local.” Few insurers are considered “national” because enrollment is mostly concentrated geographically with licenses in single states.

Since most Blue Cross Blue Shield (BCBS) insurers are licensed in a single state, they seem small at the national level, but in a majority of the country (41 states and 82% of MSAs), a BCBS insurer has the largest market share.

At the national level, the insurers with the most market share were:

• UnitedHealth Group with 14% commercial market share and 28% MA market share
• Elevance Health (formerly Anthem) with 12% commercial market share and 6% MA market share
• CVS (Aetna) with 11% for both commercial and MA market shares
• Cigna with 10% commercial market share and 2% MA market share
• Kaiser with 7% commercial market share and 6% MA market share

Megamergers

The report comes on the heels of a proposed insurer merger falling through. Cigna recently ended its attempt to acquire Humana after the 2 companies failed to agree on a price. Back in the mid-2010s, health insurance megamergers were the big news. In 2018, The American Journal of Managed Care^® named megamergers one of the hot health care trends of the year due to the finalization of 2 megamergers: CVS acquired Aetna and Cigna acquired Express Scripts.

Those mergers came after a wave of attempts, some of which were unsuccessful due to the Department of Justice (DOJ) blocking them. In 2016, DOJ had filed antitrust lawsuits against 2 planned megamergers: Anthem’s acquisition of Cigna and Aetna’s acquisition of Humana.

At the time, DOJ had alleged in the lawsuit that “These mergers would reshape the industry, eliminating two innovative competitors—Cigna and Humana—at a time when the industry is experimenting with new ways to lower healthcare costs.”