- U.S. health insurance markets have become increasingly concentrated over the past half decade, according to a new report from the American Medical Association, which argues payer M&A results in rising costs and fewer care options for patients, but largely excludes the impact of provider consolidation in driving those trends.
- Almost three-fourths of metropolitan statistical areas were highly concentrated in 2020 according to federal guidelines used by the Department of Justice and Federal Trade Commission, up from 71% in 2014. Of markets that were already highly concentrated in 2014, 54% become more concentrated as of last year, while 26% of markets that were not highly concentrated become so by 2020, the AMA said.
- The medical association's study is the latest salvo in a messaging war between provider and payer lobbies as they work to shift the blame for rapidly rising medical costs in the U.S.
Decades of consolidation among both providers and payers have contributed to rapidly rising healthcare costs, with both parties arguing the lion's share of blame should fall on the other as Washington looks to take a stricter approach to M&A regulation.
However, studies on both hospital and health insurer consolidation tend to find M&A in both industries leads to higher costs for consumers without a correspondingly increase in quality of care or care coordination.
The newest research from the AMA comes as rumors swirl that Humana is interested in acquiring Centene. The speculation, based on chatter that a Humana private jet was spotted at Centene's St. Louis headquarters and reported on by StreetInsider, reups similar speculation two years ago that Humana eventually shut down in a statement with the Securities and Exchange Commission.
But large health insurer consolidation has been rare since the DOJ opposed the mergers of Anthem and Cigna and of Aetna and Humana in 2016.
Instead, most recent market concentration has occurred when health plans exit relevant markets, leaving a greater share for the companies that remain.
Recent insurer M&A is more likely to be vertical, as payers look to snap up physician practices, pharmacy benefit managers and pharmacies integrated with PBMs. Such deals are an easier sell for regulators as the entities don't compete directly against each other, though anticompetitive hawks have aired concerns such M&A could also impede competition and raise prices.
The AMA's study analyzes market concentration and payer market shares for more than 380 metropolitan areas, the 50 states and Washington, D.C.
It also presents national market shares for the 10 biggest payers in the U.S. for the first time in the study's two-decade history, using data obtained from the Decision Resources Group.
According to the research, the insurers with the highest market share in the most MSA-level markets were Anthem with 80 MSAs, Health Care Service Corp. with 44, UnitedHealth Group and Blue Cross Blue Shield of Florida with 22 MSAs apiece, and Highmark and Kaiser, each with 20.
In 2020, 14 U.S. states had just one health insurer with a share of 50% or more of the commercial health insurance market. The 10 states with the least competitive commercial health insurance markets were Alabama, Michigan, Louisiana, South Carolina, Hawaii, Kentucky, Alaska, Illinois, North Dakota and Oklahoma.
In almost all MSA-level markets (91%) at least one insurer had a commercial market share of 31% or greater, while almost half of MSA-level markets had one insurer with a share of 50% or more last year.
The report cites outside research finding a lack of market competition among insurers leads to higher premiums and lower coverage quantity than in a competitive market, along with provider payments and healthcare quantity below competitive levels.
Additionally, horizontal mergers result in payers having a stronger footing when it comes to purchasing physician services, which could reduce prices paid to doctors. The DOJ has challenged three major insurer mergers in the past over this concern, including its suit filed in tandem with multiple state attorneys general in 2016 to block Anthem's proposed acquisition of Cigna.
That suit contributed to the payers ultimately abandoning the merger roughly a year later.
The report comes as the Biden administration doubles down on oversight, with the president signing an executive order in July calling on the DOJ and FTC "to enforce the antitrust laws vigorously" in healthcare and other key industries. The FTC has also said it's prioritizing healthcare as part of its enforcement strategy over the next decade, following what critics called lax oversight from the Trump administration.
Specifically, regulators have called out provider mergers as a main focus, which research has shown are outpacing payer deals in the U.S. in the past few years.
As a result, the American Hospital Association sent a letter last month to top officials in the White House, HHS, DOJ and FTC defending health system M&A and instead blaming commercial health plans for pricey medical costs.