AMA Says Health Insurance Competition Ebbing

The 2020 Competition in Health Insurance: A Comprehensive Study of U.S. Markets examined 384 metropolitan statistical areas across the nation.

Competition among health insurance providers in the nation's highly concentrated markets continues to decline, according to a new analysis from the American Medical Association.

The share of markets between 2014 and 2019 that were highly concentrated increased from 71% to 74%, the analysis found, with more than half (52%) of the markets that were highly concentrated in 2014 even more concentrated by 2019.

"For many of the 70 million Americans who live in highly concentrated health insurance markets, a lack of competition is a problem that keeps getting worse as consumers have more limited health insurance options to choose," AMA President Susan R. Bailey, MD, said in a media release.

"The AMA strongly encourages a dialogue among regulators, policymakers, lawmakers, and others about the need for a better, more open and competitive marketplace to benefit patients and the physicians who care for them," Bailey said.

The 2020 Competition in Health Insurance: A Comprehensive Study of U.S. Markets examined 384 metropolitan statistical areas across the nation using the Herfindahl-Hirschman Index. Markets with an HHI of 2500 points or higher are "highly concentrated."

AMA singled out Elizabethtown-Fort Knox, Kentucky as a glaring example. In 2014, this MSA-level market had an HHI of 3534 – exceeding the federal threshold for a highly concentrated market by more than 1000 points. In 2019, the HHI rose to 5159.

Anthem, the dominant provider in that region, saw its market share grow from 45% in 2014 to 70% in 2019.

Across the nation, AMA said, the average MSA-level market had an HHI of 3473 – exceeding the federal threshold for a highly concentrated market by nearly 1000 points. Market concentration levels increased on net between 2014 and 2019 with the average market HHI rising by 151 points. More than half (56%) of markets experienced an increase in the HHI, and in 17% of markets the HHI increased by at least 500 points. In markets with a rise in the HHI, the average increase was 481 points.

The HHI scores illustrate that 92% of MSA-level markets had a single insurer with a market share of 30% or greater, while 48% of MSA-level markets had a single insurer with a market share of 50% or greater, AMA said.

The study found that:

• The 10 states with the least competitive commercial health insurance markets were: 1. Alabama, 2. Hawaii, 3. Michigan, 4. Delaware, 5. South Carolina, 6. Kentucky, 7. Alaska, 8. Louisiana, 9. Illinois, 10. North Carolina. See the 10 states with the least competitive PPO, or exchange markets.
   
• Fifteen states had a single health insurer with a state-wide market share of 50% or greater: 1. Alabama (86%), 2. Michigan (67%), 3. Hawaii (66%), 4. South Carolina (64%), 5. Delaware (64%), 6. Kentucky (64%), 7. Louisiana (62%), 8. Illinois (59%), 9. Indiana (56%), 10. Mississippi (55%), 11. North Carolina (55%), 12.  Oklahoma (55%), 13. North Dakota (54%), 14. Vermont (53%), and 15. Alaska (51%).
   
• The five health insurers with the highest market share in the most MSA-level markets were: 1. Anthem (75 MSAs), 2. Health Care Service Corp. (43 MSAs), 3. UnitedHealth Group (28 MSAs), 4. Florida Blue (22 MSAs), and 5. Highmark (21 MSAs).

AHIP Responds

David Allen, an AHIP spokesperson, responded on Thursday to HealthLeaders' request for comment on the AMA report.

"The key to negotiating lower prices is competition among doctors and hospitals – not health insurance providers," Allen said in an email. "That means hospital market consolidation is a key concern.  Unfortunately, the AMA study failed to include this major factor in its analysis (in fact, the word "hospital" is only used once in the study’s 67 pages). But facts matter. 

"The fact is highly concentrated hospital markets result in health care costs above and beyond what Medicare pays for the same services. This leads to higher health care costs and increased premiums for patients and communities.

"What's more, hospital market consolidation continues to trend upward. According to the Health Care Cost Institute's Healthy Marketplace Index, almost 75% of U.S. hospital markets are now designated as 'highly concentrated.'  And it's not just hospital mergers and acquisitions that drive up prices; hospitals are also purchasing physician practices too.  

"We agree doctors and hospitals should be fairly compensated for the value of care they offer. But we all have a role to play in reducing healthcare prices and improving quality of care for America's patients. And as the facts show, provider consolidation drives up prices and fails to address healthcare costs."