AMA: Competition continues to dwindle in highly concentrated insurance markets

Stack of health insurance application forms with stethoscope on top
A new report from the American Medical Association finds that market concentration has increased from 2014 to 2019. (Getty/vinnstock)

Competition has dwindled for consumers in the most highly concentrated commercial insurance markets, a new analysis found.

The analysis, released Wednesday from the American Medical Association (AMA), also found the number of highly concentrated markets, which largely result from mergers and acquisitions, increased from 2014 to 2019. The largest U.S. doctor group is worried that consolidation among insurers has the potential to affect premiums.

“High levels of market concentration result in diminished competitive constraints, which can thereby harm patients by keeping insurance premiums high,” the group said in a release.

The AMA analyzed market concentration in 384 metropolitan areas. Researchers found that from 2014 to 2019, the share of highly concentrated insurance markets increased from 71% to 74%.

The AMA also found that 52% of the markets that were highly concentrated in 2014 grew even more concentrated in 2019.

The largest amount of concentration was among HMO plans, where 96% were highly concentrated, and point-of-service plans where 100% were in a concentrated market, the AMA found.

The AMA pointed to the Elizabethtown-Fort Knox, Kentucky, metropolitan area as an example of the encroaching increases.

The dominant insurer in the market was Anthem, which had a 45% market share in 2014. That share increased to 70% by 2019, the analysis found.

The AMA also found that 92% of the metropolitan areas had an insurer with a market share of 30% or greater, and 48% of markets had a single insurer which took up 50% or more of the market.

The state that had a single greatest market share was Alabama, where one insurer represented 86% of the market.

“The prospect of future consolidation in the health insurance industry should be viewed in the context of the low levels of competition in most health insurance markets,” AMA said.

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The group has also said that insurer consolidation can lead to more market power in the purchasing of physician services.

The AMA said in the report that insurer consolidation can lead to lower physician earnings and employment.

Insurers, on the other hand, say that increased consolidation among doctors' offices and hospitals leads to higher prices for patients.

“By no surprise, research has found that when health systems in a region get bigger and squeeze out competition, prices go up for consumers,” according to testimony from insurer group America’s Health Insurance Plans during a 2019 Senate hearing on consolidation. “That is a basic economic reality.”