AMA: Payers Operate in Extremely High Concentrated Markets

October 25, 2017 - Payers have significant control of their respective healthcare markets as 69 percent of payers offering HMO, PPO, POS, and public health exchanges operate in very high concentrated markets, AMA found in a study of national insurance markets.

Based on federal guidelines used to assess the level of market competition from 2016 data, AMA’s findings revealed that in 43 percent of metropolitan areas a single payer had 50 percent share of the commercial health insurance market. In 2014, that number was 40 percent, which indicates that payers have gradually increased their market ownership over the years.

AMA stated that this increase of payer market ownership may harm consumers and that possible payer mega-mergers, which have faced opposition from federal judges because of possible market monopolies, require further judicial oversight.

“These markets are ripe for the exercise of health insurer market power, which harms consumers and providers of care,” AMA said. “Our findings should prompt federal and state antitrust authorities to vigorously examine the competitive effects of proposed mergers between health insurers.”

Other findings in the report indicate that Anthem has the largest geographic market share of any other payer in the US. Anthem had the largest market share in 82 out of 389 examined metropolitan areas (MSAs) followed by Health Care Service Corp. (42) and UnitedHealth Group (26).

The report also identified the states with both the most and least competitive commercial insurance competition.

States including Kentucky, Alaska, South Carolina, Mississippi, South Dakota, Oklahoma, Vermont, Arkansas, Nevada and New Mexico experienced the largest increases in market concentration

Conversely, Alabama, Delaware, Hawaii, South Carolina, Louisiana, Michigan, Kentucky, Vermont, Alaska, and Illinois were found to have the least competitive commercial health insurance markets.

Overall market share based on commercial plan products was extremely high, as 89 percent of MSAs had one payer that had a combined HMO, PPO, POS, and exchange market share of 30 percent or greater. Nine percent of MSAs had one insurer with combined market share of 70 percent.

Within the HMO product market, 98 percent of MSAs had at t least one insurer with an HMO market share of 30 percent or greater. Seventy-three percent of MSAs had one insurer with an HMO market share of 50 percent or greater and 34 percent of MSAs had payers who owned 70 percent or more of the HMO market share.

A single payer had 30 percent or greater market share of PPO plans in 95 percent of MSAs.

In 58 percent of MSAs, one insurer had a PPO market share of 50 percent or greater, and 25 percent of MSAs had one payer own 70 percent or more of PPO offerings.

The POS product market was the most concentrated market product among observed MSAs. One-hundred percent of MSAs had at least one payer own 30 percent or more of the POS market share.

Among 91 percent of MSAs, one payer had a POS market share of 50 percent or greater. Sixty percent of the MSAs had one payer that controlled a POS market share of 70 percent or greater.

In the public health exchange market, 93 percent of MSAs had one payer with an exchange market share of 30 percent or greater. Fifty-eight percent of MSAs had one insurer that controlled 50 percent or more of the exchange market share, and 27 percent of MSAs had one insurer that controlled 70 percent or more of the exchange market.

Even though higher market concentration has proven to increase a payer’s ability to lower their prices for healthcare services, AMA concluded its study by suggesting that stakeholders and researchers should continue to monitor the effects of anti-competition on payers and the healthcare industry.

“Our studies will continue to monitor competition in health insurance markets and be used to assess the competitive effects of proposed mergers among health insurers,” AMA said.