American Medical Association report: Health insurance markets increasingly concentrated

Health insurance markets across the country are becoming increasingly concentrated, making them ripe for payers to exercise market power in a way that can negatively impact patients and healthcare providers, according to a new report.

The report, produced by the American Medical Association, found that in 43% of metropolitan areas in 2016, a single health insurer had at least a 50% share of the market. That was the case in 40% of metropolitan areas in 2014. Put another way, the commercial health insurance market became more concentrated from 2014-2016 in 27 states.

Overall, 69% of metropolitan areas had a significant absence of health insurer competition in 2016—earning them a “highly concentrated” rating based on federal guidelines used to assess market competition.

Anthem, the AMA noted, dominated the rest of the pack by being largest health insurer by market share in 82 out of 389 metropolitan areas that the trade group examined. Health Care Service Corp. had a market share lead in 42 out of 389 metropolitan areas, while UnitedHealth led in 26 areas.

Two separate federal judges, however, have prevented further insurer consolidation by blocking the Aetna-Humana and Anthem-Cigna mergers—decisions that the AMA cheered. Both Aetna and Anthem ultimately decided to abandon the deals.

RELATED: Why health insurance companies should reconsider attempting megamergers in the future

“Previous versions of the AMA study played a key role in efforts to block the proposed megamergers by helping federal and state antitrust regulators identify markets where those mergers would cause anticompetitive harm,” AMA President David O. Barbe, M.D., said in a release.

The AMA report urged federal and state regulators to continue to scrutinize insurer consolidation, noting that retrospective studies of past deals have shown that less competition drives premiums upward. Insurers with greater market power also tend to make payments to healthcare providers below competitive levels, and reduce the quantity of coverage to levels below those produced in a competitive market.

But America’s Health Insurance Plans pointed out in a study released last month that provider consolidation—specifically, hospital systems buying smaller physician practices—also contributes to rising costs.

Kristine Grow, AHIP’s senior vice president of communications, also offered the following statement:

“The role of health insurance providers is to ensure that every consumer they serve receives the greatest value possible—the best possible experience, outcomes and cost,” she said.

“As they build their networks, health insurance providers focus on how they can work with doctors, hospitals and health systems to deliver high quality, good health outcomes, and the best use of every dollar that a consumer spends on care. We are focused on a better experience for the patient.”