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Competition Declined in Majority of Health Insurance Markets Where it was Most Scarce


AMA study finds increasingly limited health insurance options for patients in highly concentrated markets

Competition and choice continue to fade away for many patients as most highly concentrated markets for commercial health insurance have grown even more concentrated than they were five years ago, according to today's release of the AMA's annual analysis: Competition in Health Insurance: A Comprehensive Study of US Markets.

Between 2014 and 2019, the share of markets that were highly concentrated increased from 71% to 74%. Moreover, more than half (52%) of the markets that were highly concentrated in 2014 grew 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," said AMA President Susan R. Bailey, M.D. "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."

The 2020 edition of Competition in Health Insurance: A Comprehensive Study of U.S. Markets analyzed market concentration in all 384 metropolitan statistical areas (MSAs), the 50 states and the District of Columbia using the Herfindahl-Hirschman Index (HHI). Markets that exceed an HHI of 2500 points are "highly concentrated" according to federal guidelines. High levels of market concentration result in diminished competitive constraints, which can thereby harm patients by keeping health insurance premiums high.

The commercial health insurance market for Elizabethtown-Fort Knox, Ky. is an illustrative example of a highly concentrated market that has grown even more concentrated during the last five years. 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. By 2019, increased market concentration resulted in an HHI of 5159, a change of 1625 points.

The substantial change in the HHI for Elizabethtown-Fort Knox reflects a large increase in market share of the dominant health insurer. In this MSA-level market, the dominant health insurer was Anthem with a 45% market share in 2014. Anthem's market share increased to 70% by 2019. High market shares and high concentration levels are concerning because they increase the risk of exercising market power, such as squeezing out competitors, raising prices, reducing output or diminishing innovation without fear of losing business to rival health insurers.

Like the experience of Elizabethtown-Fort Knox, several of the study's findings point to worsening conditions across most of the MSAs examined by the AMA. 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. Fifty-six percent 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.

Widespread market concentration reflects the fact 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.

The prospect of future consolidation in the health insurance industry should be viewed in the context of the low levels of competition in most health insurance markets. For nearly 20 years, the AMA study has been a helpful resource to researchers, lawmakers, policymakers, and regulators as they work to identify markets where future consolidation among health insurers may cause competitive harm to patients.

The AMA's latest study of competition in the health insurance industry shows:

  • The 10 stateswith 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
  • Fifteen stateshad 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).

Competition in Health Insurance: A Comprehensive Study of U.S. Markets is a vital element of AMA's continued antitrust advocacy to protect patients and physicians from competitive harm. Health insurance market concentration will continue to be a vital issue of public policy for the AMA, the federation of medicine, and the nation's physicians and patients. The 2020 updated study is available for download from the AMA's Competition in Health Insurance website.


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