Tip Sheets

Resources to help you monitor the impact of recent health insurer mergers

By Joseph Burns

One of the big annual stories to watch in recent years is the impact that consolidation among health insurers will have on consumers. In recent years, several big deals have caused the nation’s largest health insurers to get even bigger and to enter new markets by acquiring related services, such as physician groups, pharmacy benefit managers and home health care providers.

We already know from a report that the American Medical Association published last year that health insurers in 75% (285) of the nation’s 382 metropolitan-statistical areas (MSAs) were considered highly concentrated.

The report, “The 2019 update to Competition in Health Insurance: A Comprehensive Study of U.S. Markets, defines highly concentrated as having a score under the Herfindahl–Hirschman Index (HHI) of more 2,500. HHI is a commonly accepted measure of market concentration that the federal Department of Justice uses to assess levels of market competition. In an earlier blog post, we covered the HHI as it related to Medicare Advantage plans.

A key question for health care journalists and others who monitor competition among insurance companies insures is whether health insurers have levels of market power that can harm consumers and health care providers, the AMA said.

In addition to reporting on the level of competition in health insurance markets, the report also showed the commercial market share in each state and MSA for the largest health insurers and their levels of market concentration by HHIs.

Issued in September, the 18th edition of its report on health insurer competition provided an update on earlier research the association has done on competition among health insurers. The report uses enrollment data on an estimated 73 million Americans with commercial health insurance.

The effect of such market concentration is that health insurers can raise premiums and thus increase profits while also limiting access to hospitals, health systems and physicians through narrow networks, said AMA President Patrice A. Harris, M.D.

The level of concentration for the 75% of markets in the United States that are highly concentrated rose by 71% from 2014 through 2018, the report showed. In other words, the market for health insurance became much more concentrated over the five years ending in 2018.

“In almost half of metropolitan areas, a single health insurer has 50 percent or more of the market, and patients are not benefitting from this degree of market power,” according to the report.

“The average HHI across MSA-level markets was 3,504 in 2018,” the report said. “Among the 58 percent of markets that experienced an increase in the HHI between 2014 and 2018, the average increase was 498 points.”

When HHI is between 1,500 and 2,500 points, the DOJ considers those markets to be moderately concentrated, and when the HHI or more than 2,500 points, it’s considered highly concentrated.

Now get this: In almost half of all MSAs (182 or 48% of 382 MSAs), one health insurer’s share of the market was at least 50 percent, and in 348 MSAs (which is 91% of the total) at least one health insurer held a commercial market share of 30% or greater.

Among the markets that did not have high concentrations of health insurers in 2014, more than a quarter of those markets (27%) experienced an increase in the HHI large enough to move them into the highly concentrated category in 2018. What’s more, some 40% of not highly concentrated markets also had an increase, but that increase was not significant enough to make them highly concentrated, the report added.

One of the most useful ways for local journalists to view the data is at the state and MSA levels. The report has pages of data on concentration levels for each state and MSA. It also breaks down the numbers into the most-concentrated states in six different ways. There are separate files (PDFs) for the 10 states in 2018 with the:

The AMA also devotes a section on its website to research it has done on competition among health insurers. Journalists will find research data on mergers that Anthem and Cigna and that Aetna and Humana proposed and later dropped. The research showed the likely impact that the blocked Anthem-Cigna and Aetna-Humana mergers would have had on commercial markets and that the Aetna-Humana merger would have had on Medicare Advantage markets. The mergers likely will be anticompetitive in numerous markets, the AMA researchers conclude.