In recent years, the health insurance industry in the United States has experienced significant changes due to mergers, acquisitions, and vertical integration among insurers. This consolidation has resulted in more concentrated markets, which raises concerns about competition and consumer choice.
Evidence suggests that these developments have led to higher healthcare prices, benefiting the insurers rather than the consumers they serve. Federal and state policymakers are now focusing on the implications of this consolidation and considering regulatory measures to enhance transparency, analyze payer profits and premium trends, and preserve competition in insurance markets. They are also exploring reforms in medical loss ratio reporting and restrictions on certain ownership structures for vertically integrated insurers. These interventions aim to protect patients from the negative effects of further consolidation.
Specialization among insurers has led to the emergence of dominant players in specific market segments. For example, Oscar Health has identified the individual market as the fastest-growing segment and plans to expand its market share. UnitedHealth Group and Centene have become the largest private insurers in the commercial and ACA marketplace. Additionally, five for-profit insurers accounted for half of the national Medicaid managed care enrollment in 2020.
The Medicare Advantage market, serving older Americans, has also experienced significant concentration. UnitedHealth Group, Humana, and CVS/Aetna captured a substantial share of this growing market. However, Aetna's attempted acquisition of Humana in 2015 was blocked due to antitrust concerns.
The Herfindahl-Hirschman Index (HHI) is used to measure market concentration and competition levels. A higher HHI indicates a more concentrated market with reduced competition. Recent data shows high levels of concentration in health insurance markets, with a majority of commercial, Medicare Advantage, and ACA markets classified as highly concentrated.
Insurer consolidation and high market concentration have tangible effects on healthcare prices and consumer choice. While insurers argue that mergers and acquisitions lead to lower prices for consumers, evidence suggests otherwise. Consumers face rising prices and limited choices as the number of available payers decreases. This concentration allows insurers to exert greater influence over healthcare providers, potentially compromising the quality of care. The consolidation trend also raises concerns about compensation for providers and pharmacies.
Regulatory measures to address market concentration are crucial. Policymakers must find a balance between fostering competition and ensuring access to affordable and quality healthcare. The implications of consolidation will continue to be a significant issue for stakeholders in the evolving health insurance market.