AMA: 73% Of Health Insurance Markets Are Highly Concentrated

Nearly three-quarters of metropolitan statistical areas are concentrated health insurance markets, according to a new study from the American Medical Association (AMA).

The analysis (PDF) found that 73% of MSAs are highly concentrated, based on Department of Justice and Federal Trade Commission horizontal merger guidelines. In 91% of markets, a single insurer had a market share of 30% or more, and in 46% of markets, a single payer’s market share was at least 50%.

Fifty-seven percent of markets saw their concentration index rise, and the increase was at least 500 points in 21% of markets.

“As merger rumors involving health insurers swirl, the prospect of future consolidation in the health insurance industry should be more closely scrutinized given the low levels of competition in most health insurance markets,” AMA President Gerald E. Harmon, M.D., said in a statement.

“For two decades, the AMA study has been helping researchers, lawmakers, policymakers, and federal and state regulators identify markets where consolidation involving health insurers may cause competitive harm to consumers and providers of care,” Harmon said.

The overall share of markets that were highly concentrated increased from 71% to 73% between 2014 and 2020, according to the report.

The report found that this included markets that were already quite concentrated in 2014. More than half (54%) of markets that were highly concentrated in 2014 became more so by 2020.

In addition, 26% of health insurance markets that were not considered highly concentrated in 2014 evolved to be highly consolidated by 2020, the report found.

The researchers said that the study should raise significant antitrust concerns as market consolidation continues to grow. They noted that research suggests insurers in competitive markets are more likely to lower premiums and enhance benefits to attract customers.

“Conceptually, mergers and acquisitions can have beneficial and harmful effects on consumers,” the researchers wrote. “However, only the latter has been observed. It appears that 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 passing any benefits obtained through to consumers.”

The researchers also argue that in markets where a single insurer has significant market share, they can pay physicians less, which could have an outsized impact on their business.

Insurers, on the other hand, point to provider consolidation as a key issue driving up costs for patients.

The AMA said it will continue to evaluate the impact of consolidated insurer markets with future analyses.


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