Access to Care

Most commercial health insurance markets are highly concentrated

Andis Robeznieks , Senior News Writer

Research from the AMA shows that half of all states had commercial health insurance markets that were less competitive in 2017 than during the previous year.

"The AMA continues to urge that competition, not consolidation, is the right prescription for health insurance markets," said AMA President Barbara L. McAneny, MD. "The slide toward insurance monopolies has created a market imbalance that disadvantages patients and favors powerful health insurers.”

The 2018 update to Competition in Health Insurance: A Comprehensive Study of U.S. Markets presents 2017 data on the degree of competition in health insurance markets and identifies where consolidation may cause competitive harm to patients and physicians.

Discover the AMA's position on health insurance mergers and why the AMA believes fewer insurance carriers undermine physician practices and harm patient care.

The study examines market share and concentration data for 50 states, the District of Columbia, and 380 metropolitan statistical areas (MSAs). Researchers found that the majority of U.S. commercial health insurance markets are highly concentrated and thus ripe for the exercise of health insurer market power that harms patients and physicians.

That exercise of market power leads to higher premiums for patients, lower payments to physicians, and fewer people with coverage than in a competitive market. The study's data is based on commercial enrollment in HMO, PPO, POS and public exchange plans, including participation in consumer-driven health plans.

To gauge market concentration, the researchers used the Herfindahl-Hirschman Index (HHI), a measure used by the Justice Department and the Federal Trade Commission as an indicator of market competition. Smaller numbers indicate greater competition. An HHI of 10,000 indicates a monopoly.

In 91 percent of MSAs, at least one insurer had a commercial market share of 30 percent or greater. The study says that in 46 percent of MSAs, a single insurer controlled at least half of the market. Other notable findings include:

  • In 2016 and 2017, Anthem had the highest market share in more MSAs than any other insurer. Almost three-quarters of commercial markets are highly concentrated (HHI is greater than 2,500).
  • The average HHI in commercial markets was 3,464, and the median HHI was 3,199.
  • States with the largest decrease in competition levels between 2016 and 2017 are North Dakota, Alaska and Louisiana.
  • States with the least competitive commercial health insurance markets are Alabama, Hawaii and Louisiana.

In fact, Alabama has an HHI of 7,194 with Blue Cross and Blue Shield of Alabama holding an 84 percent statewide market share. The Tuscaloosa, Alabama, MSA market has an 8,355 HHI, with Blue Cross and Blue Shield of Alabama holding a 91 percent market share.

Despite insurance company predictions to the contrary, industry consolidation has resulted in the possession and exercise of health insurer monopoly power—the ability to raise and maintain premiums above competitive levels—instead of their passing on purported efficiency benefits to consumers.

“The prospect of future mergers involving health insurance companies should raise serious antitrust concerns,” Dr. McAneny said. “There is already too little competition among insurers, to the detriment of patients. Networks are already too narrow, and premiums are already too high."

The AMA led a coalition of 17 state medical societies and marshaled nationally recognized economic and legal experts to block the proposed Anthem-Cigna and Aetna-Humana megamergers that fell apart in 2017. Blocking the Anthem-Cigna deal averted an estimated $500 million in lower annual payments to physicians.

The AMA also worked to block the proposed CVS-Aetna merger. While the Justice Department's requirement that Aetna divest its Medicare Part D drug plan business was welcomed, the AMA expressed disappointment that the deal was allowed to move forward.