The Division of Economic and Health Policy Research conducts independent research on competition in health insurance markets.

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 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. 

The 2021 update to Competition in Health Insurance: A Comprehensive Study of U.S. Markets (PDF) presents 2020 data on the degree of competition in commercial health insurance 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 all state- and MSA-level markets in the U.S.

Key findings from the 2021 update include:

  • Seventy-three percent (280) of MSA-level markets were highly concentrated (HHI>2,500) in 2020, up from 71% in 2014.
  • The average HHI across MSA-level markets was 3494 in 2020.
  • Fifty-seven percent of markets experienced an increase in the HHI between 2014 and 2020. Among those markets, the average increase was 531 points.
  • Of the markets that were not highly concentrated in 2014, 26% experienced an increase in the HHI large enough to place them in the highly concentrated category by 2020. Another 39% also had an increase, though not large enough to make them highly concentrated.
  • In 91% (348) of MSAs, at least one insurer held a commercial market share of 30% or greater, and in 46% (178) of MSAs, one insurer's share was at least 50%.
  • A Blue Cross Blue Shield (BCBS) affiliate had the largest state-level market share in 40 states.
  • A BCBS affiliate had the largest MSA-level market share in 81% (311) of MSAs.
  • Anthem had the largest MSA-level market share in 21% (80) 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

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.

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