Competition in health care research

The Division of Economic and Health Policy Research conducts independent research on competition in health insurance markets. Began researching pharmacy benefit manager (PBM) markets.

A key public policy question is whether health insurance markets are competitive or whether insurers have market power, which can harm consumers and health care providers. An important indicator of competition and market power is market concentration. The U.S. Department of Justice and the Federal Trade Commission are investigating mergers and acquisitions.

One of the division’s top endeavors is Annual. Competition in health insurance (CHI) study. This annually updated study is the only publication of its kind. The division also conducted analyzes of past and proposed mergers among health insurers based on an analysis of unique enrollment data from a single data source for health insurers in all states and US metropolitan statistical areas (MSAs).

This year, the department began researching PBM markets. Using special registry data on commercial drug coverage lifetimes from the same data source used for the CHI study, published as part of this paper. Policy research perspectives (PRP) series that aims to shed light on this uneducated market.

2021 update to Competition in Health Insurance: A Comprehensive Study of American Markets (PDF) provides 2020 data on the competitive landscape of commercial health insurance markets. It is intended to identify areas where consolidation of health insurers would result in anticompetitive harm to consumers and care providers.

The study reports the two largest insurers’ market shares and concentration levels (HHIs) for all state and MSA-level markets.

Key findings from the 2021 update include:

• In the year Seventy-three percent (280) of MSA markets were highly concentrated (HHI >2,500) in 2020, up from 71 percent in 2014.
• The average HHI in MSA-level markets was 3494 in 2020.
• Between 2014 and 2020, 57 percent of markets experienced an HI increase. Among those markets, the average increase was 531 points.
• In the year Of the markets that did not receive significant attention in 2014, 26% experienced a significant increase in HHI by 2020. Another 39% also had an increase, although not enough to garner significant attention.
• In 91% (348) of MSAs, at least one insurer held 30% or more of the commercial market share, and in 46% (178) of MSAs, one insurer’s share was at least 50%.
• Blue Cross Blue Shield (BCBS) affiliate had the largest state-level market share in 40 states.
• BCBS affiliate had the largest MSA level market share in MSA at 81% (311).
• Anthem had the largest MSA level market share in MSA at 21% (80).
• Nationally, UnitedHealth Group was the largest commercial health insurer in the US and Centene was the largest insurer in the exchange.

From the study maps

Using novel 2020 data on the life of commercial drug coverage based on five PBM activities, this is titled PRP. Competition in commercial PBM markets and vertical integration of health insurers with PBMs (PDF) provides a descriptive analysis of PBM markets and the provision of PBM services to health insurers. It reports on the ten largest commercial PBMs and drug insurers nationally in the United States. The paper presents the two largest PBM market shares and concentration levels (HHIs) for all state and MSA level markets. Finally, it measures the degree of integration of health insurers with PBMs.

Key findings from the paper include:

• Nationally, the top four PBMs offer discounts for a combined 66% of commercial drug life. The results are similar for retail network management and claims adjudication.
• Six out of 10 PBMs that offer discount negotiations are used by just one insurer or pool (blues).
• For the other two PBM functions — formulary management and benefit design — 37% of drug life is managed “in-house” by insurers.
• The average HHIs for state-level and MSA-level rebate markets are 3746 and 4103, respectively. The numbers are similar for the retail network management and claims adjudication markets.
• Nationally, 69 percent of commercial drug life insurance is vertically integrated. Although the averages across states and MSAs are slightly lower (63 percent and 65 percent, respectively), there is wide variation among states and MSAs.

AMA conducted analyzes of the potential impact of the pending Anthem-Cygna and Aetna-Himana mergers on the commercial markets and Medicare Advantage markets (see below). The analysis found that each combination could be anti-competitive in many markets across the US

Read more about the AMA’s successful efforts to block Hymn-Signa and Etna-Humana fusion.

This paper (PDF) examines the relationship between health insurance market concentration and prices. It is a case study of the 2008 merger between UnitedHealth Group and Sierra Health Services.

Health plan premiums in the Nevada markets increased 13.7 percent after the merger. The findings show that the merger took advantage of the market power they gained.