Competition in health care research


The Division of Economic and Health Policy Research conducts independent research on competition in health insurance markets. It has also begun conducting research on pharmacy benefit manager (PBM) markets. 

AMA Research Challenge finals

Reserve your seat! Five finalists present their research to elite panel of judges. Winner of $10,000 grand prize announced live on Feb. 6, 2024!

A key question of public policy is whether health insurance markets are competitive or whether insurers have market power, which can harm consumers and health care providers. A useful indicator of competition and market power is market concentration. The U.S. Department of Justice and the Federal Trade Commission examine concentration in their evaluation of proposed mergers between firms.

One of the division's most significant efforts is the annual Competition in Health Insurance (CHI) study. This annually updated study is the only publication of its kind. It is based on an analysis of unique enrollment data from a single data source for health insurers in all states and metropolitan statistical areas (MSAs) of the U.S. The division has also conducted analyses of past and proposed mergers among health insurers.

This year the division began conducting research on PBM markets. Using unique enrollment data on commercial drug coverage lives from the same data source used for its CHI study, the division has published a paper as part of its Policy Research Perspectives (PRP) series that aims to shed light on this understudied market.

The 2022 update to Competition in Health Insurance: A Comprehensive Study of U.S. Markets (PDF) presents 2021 data on the degree of competition in commercial health insurance markets, and for the first time, in Medicare Advantage markets. It is intended to help identify areas where consolidation involving health insurers may cause anticompetitive harm to consumers and providers of care. 

The study reports the two largest insurers’ market shares and the concentration levels (HHIs) for state- and MSA-level markets in the U.S.

Key findings from the 2022 update include:

Commercial markets

  • Seventy-five percent (287) of MSA-level markets were highly concentrated (HHI>2,500) in 2021, up from 71% in 2014.
  • The average HHI across MSA-level markets was 3504 in 2021.
  • Fifty-eight percent of markets experienced an increase in the HHI between 2014 and 2021. Among those markets, the average increase was 540 points.
  • Of the markets that were not highly concentrated in 2014, 30% experienced an increase in the HHI large enough to place them in the highly concentrated category by 2021. Another 33% also had an increase, though not large enough to make them highly concentrated.
  • In 91% (349) of MSAs, at least one insurer held a commercial market share of 30% or greater, and in 48% (183) of MSAs, one insurer's share was at least 50%.
  • A Blue Cross Blue Shield (BCBS) insurer had the largest state-level market share in 40 states.
  • A BCBS insurer had the largest MSA-level market share in 81% (311) of MSAs.
  • Anthem had the largest MSA-level market share in 21% (82) of MSAs.
  • At the national level, UnitedHealth Group was the largest commercial health insurer in the U.S. and Centene was the largest insurer in the exchanges.
Graphic of map indicating 10 states with least competitive commercial markets.

Maps from the study

Medicare Advantage markets

  • Seventy-nine percent (299) of MSA-level markets were highly concentrated (HHI>2,500) in 2021, down from 87% in 2017.
  • The average HHI across MSA-level markets was 3331 in 2021.
  • In 91% (347) of MSAs, at least one insurer held a market share of 30% or greater and in 34% (131) of MSAs, one insurer's share was at least 50%.
  • At the national level, UnitedHealth Group was the largest health insurer in the U.S.

Maps from the study

Students save with AMA membership

  • $68 for a four-year membership–only $17 per year
  • Unlimited access to the JAMA Network®

Supporting you today as a medical student. Protecting your future as a physician.

Using novel 2020 and 2021 data on commercial drug coverage lives and the PBMs used by insurers to perform five PBM functions, this paper titled Competition in Commercial PBM markets and Vertical Integration of Health Insurers with PBMs: 2023 Update (PDF) presents a descriptive analysis of PBM markets and the provision of PBM services to health insurers. It reports the ten largest commercial PBMs and drug insurers in the U.S. at the national level. The paper also summarizes concentration levels (HHIs) in state- and MSA-level PBM markets and presents the two largest PBM market shares and HHIs for all state-level markets. Finally, it quantifies the extent of vertical integration of health insurers with PBMs.

Key findings from the paper include:

  • At the national level in 2021, the top four PBMs [Express Scripts, OptumRx, CVS Health (owner of CVS Caremark and Aetna Pharmacy Management) and Prime Therapeutics] provided rebate negotiation services for a collective 68% of commercial drug lives. Express Scripts was the largest with a 21% share. The results are similar for retail network management and claims adjudication. 
  • The PBMs’ national-level shares were also largely similar between 2020 and 2021. The exception is CVS Health, whose share increased from 9% to 16% in rebate negotiation and retail network management as a result of its acquisition of Aetna.
  • Consequently, the collective share of the largest four PBMs increased from 64% in 2020 to 68% in 2021. 
  • For the other two PBM functions—formulary management and benefit design—about 36% of drug lives are managed by insurers “in house.” For the first three PBM functions (above), about 1% to 3% of lives are managed in house. 
  • With regard to local competition among PBMs providing rebate negotiation, retail network management and claims adjudication, the average HHI across states is around 3700 and across MSAs is around 4100. 
  • Over 80% of states and MSAs are highly concentrated across those 3 PBM functions, and each of these fractions increased from 2020 as a result of the Aetna-CVS merger.
  • At the national level, 70% of commercial drug lives are with a vertically integrated insurer. Although the averages across states and MSAs are slightly lower (63% and 65%), in some states/MSAs only around 5% of lives are vertically integrated while in others almost all are.  

AMA conducted analyses (see below) of the likely impact that the blocked Anthem-Cigna and Aetna-Humana mergers would have had on commercial markets and of the Aetna-Humana merger on Medicare Advantage markets. The analyses found that each of the mergers would have likely been anticompetitive in numerous markets across the U.S.

Read more about the AMA’s successful efforts to block the Anthem-Cigna and Aetna-Humana mergers.

This paper (PDF) examines the association between health insurance market concentration and prices. It is a case study of the 2008 merger between UnitedHealth Group and Sierra Health Services.

It found that health plan premiums in Nevada markets increased by 13.7% after the merger. The findings suggest that the merging parties exploited the market power gained from the merger.