For 73M Americans, limited choices for commercial health insurance, AMA study finds

Merger
A new analysis finds patients have fewer choices when it comes to commercial health insurance as competition has decreased over four years. (daizuoxin/iStock/Getty Images Plus/Getty Images)

An estimated 73 million Americans with commercial health insurance live in highly concentrated markets and face limited choices as competition has decreased in four years, according to a new American Medical Association (AMA) study.

The share of highly concentrated markets in the commercial health insurance industry has increased from 71% to 75% from 2014 to 2018, the AMA announced.

As a result, millions of Americans have limited options, based on estimates from the AMA’s annual assessment of market concentration in the health insurance industry.

Free Daily Newsletter

Like this story? Subscribe to FierceHealthcare!

The healthcare sector remains in flux as policy, regulation, technology and trends shape the market. FierceHealthcare subscribers rely on our suite of newsletters as their must-read source for the latest news, analysis and data impacting their world. Sign up today to get healthcare news and updates delivered to your inbox and read on the go.

“Americans in three-quarters of commercial health insurance markets have a limited number of health insurers from which to choose,” said AMA President Patrice Harris, M.D.

That has negative consequences for patients who rely on commercial health insurance. “In almost half of metropolitan areas, a single health insurer has 50% or more of the market, and patients are not benefiting from this degree of market power. While health insurers grow corporate profits, networks are too narrow, premiums are too high and benefits are too watered down,” she said.

The AMA has opposed some major insurer consolidations, including that of Aetna and CVS Health. However, a federal judge earlier this month signed off on a settlement between the Department of Justice, CVS Health and Aetna, ending a monthslong review of the merger that makes one of the largest healthcare giants even larger.

The AMA’s position is that consolidation creates a lack of competition among commercial health plans that tends to lead to higher premiums for consumers and lower payment for physician services.

The 2019 report analyzed market concentration in 382 metropolitan statistical areas (MSAs) in all 50 states and the District of Columbia. According to the study, 75% of those markets were highly concentrated, based on a federal threshold. The average market was more than 1,000 points over the federal threshold to determine a highly concentrated market.

Widespread market concentration reflects the fact that 91% of MSA-level markets had a single insurer with a market share of at least 30%, the AMA said.

America’s Health Insurance Plans (AHIP) responded to the report, saying consumers still have many choices when it comes to health insurance coverage so they can select a plan that best fits their needs. “Today, healthcare works for hundreds of millions of Americans, from the 180 million Americans who are covered through work to nearly 22 million Americans covered by Medicare Advantage,” the group said.

“Health insurance providers are committed to ensuring patients have affordable choices for coverage so they can get the care they need, when they need it,” AHIP said in a statement emailed to FierceHealthcare.

On the individual marketplace, health insurers are set to expand 2020 offerings. Many companies that are currently in the Affordable Care Act marketplaces said they want to expand. Last year (for 2019 plans), Medicare Advantage enrollees saw an increase in plan choices and expanded benefits. In 2019, the average number of Medicare Advantage plan choices increased by five plans to roughly 34 plan choices per county, AHIP said.

AHIP also noted the study from the Health Care Cost Institute that found nearly 3 in 4 hospital markets around the U.S. are "highly concentrated.”

“Large, consolidated hospital systems have stronger market power to drive up prices, giving them the ability to negotiate prices that are significantly higher than what Medicare pays for the same exact services. The result is higher health costs and increased premiums,” AHIP said.

“In fact, people living in these highly consolidated hospital markets pay significantly higher premiums than residents in markets that have less provider consolidation. When providers consolidate and gain more market power, they have an incentive to demand higher prices. Other studies have clearly demonstrated the link between provider consolidation and higher healthcare costs,” the group said.

According to the AMA analysis, Anthem continued to dominate in 2018 and was the largest insurer in more metropolitan markets than any other insurer. It was the largest health insurer by market share in 77 out of 382 metropolitan areas that the AMA report examined. The report noted the next four health insurers with the highest market share in the most MSA-level markets were: Health Care Service Corp. (42 MSAs), UnitedHealth Group (27 MSAs), Florida Blue (22 MSAs) and Highmark (21 MSAs).

The AMA’s latest snapshot of competition in the health insurance industry provided a state-by-state breakdown. It showed the following:

  • The 10 states (PDF) with the least competitive commercial health insurance markets were: Alabama, Louisiana, Hawaii, Delaware, South Carolina, Michigan, Alaska, Kentucky, North Dakota and Illinois.
  • The 10 states (PDF) that experienced the largest decrease in competition levels between 2017 and 2018 were Utah, Louisiana, Florida, New Hampshire, Alabama, Alaska, Iowa, Tennessee, Massachusetts and Wyoming.

Several of the study’s findings point to worsening conditions, the AMA said. Fifty-eight percent of markets experienced an increase in the index used to calculate market concentration, and in 20% of markets the increase was at least 500 points. In markets with a rise in the index, the average increase was 498 points.

The study found evidence of increases in concentration in MSA-level markets that were already highly concentrated in 2014, as well as in markets that were not. More than half (54%) of the markets that were already highly concentrated became even more so in 2018. Twenty-seven percent of the markets that were not highly concentrated in 2014 experienced an increase in the index large enough to place them in the highly concentrated category in 2018.

“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,” the AMA said.

Suggested Articles

The Centers for Medicare & Medicaid Services released the MA plan star ratings for the 2020 plan year on Friday.

A New Orleans-based genetic testing company will pay $42.6 million to resolve False Claims Act and kickback allegations.

A three-judge appellate panel didn't appear convinced that Medicaid work requirements meet the law's objectives of providing coverage.