How Concentrated Is the US Health Insurance Market

Like many mature markets, the US health insurance industry has come to be dominated by a few health plan companies.  This has implications for prices, service and innovation.  A couple of new studies discuss this concentration.  The first is from the American Medical Association, which I find hilarious because the AMA ignores the concentration on the provider and physician side of the market.  The AMA also has become a woke joke, more interested in spreading ideology into medicine than in what is best for patients.  The study does a credible job of defining the level of concentration.  Health insurance has both a local and a national market aspect.  Large multi-state employers typically self-fund and purchase administrative services from a few national health plan companies–UnitedHealth, Cigna, Aetna, the Blue Cross plan association.  That market can actually be somewhat competitive.  Smaller employers and individuals are typically buying in a local market and those tend to be very highly concentrated.  Medicare Advantage and Medicaid health plan options also tend to be local market-oriented.  (AMA Study)

The AMA data shows that collectively on a national basis for commercial health insurance the Blue Cross plans, which basically have exclusive territories and don’t compete with each other, have a 43% market share followed by UnitedHealth Group with 16%, Aetna with 12% and Cigna with 9%.  Across 384 local metropolitan markets, 97% were highly concentrated under federal guidelines.  In almost half the markets, one insurer had a market share of 50% or more and in 91%, one insurer had a market share of 30% or more.  The most concentrated markets were Alabama, Kentucky, Hawaii, Michigan and Louisiana, each dominated by a Blues plan.  For Medicare Advantage, the numbers are similar, with UnitedHealth and Humana collectively holding a 50% market share and almost all local markets being highly concentrated.

The second study comes from the Peterson-Kaiser Health Foundation, using data from 2013 to 2023 to track the trends in concentration for commercial health insurance.  In general, individual health insurance markets became less concentrated, largely because of the ACA exchanges, but all other markets more concentrated.  It should be noted that all markets were highly concentrated to start with.  UnitedHealth covered 45 million Americans; Anthem, a large collection of Blues plans, 36 million; Aetna 25 million; Centene 19 million, almost all Medicaid; HCSC, another Blues Plan conglomerate, 19 million and Cigna 16 million.  A significant shift has been occurring in the employer and group market, where fully insured plans have declined in membership to 48 million, while self-funded plans now cover 126 million.  Self-funded plans are generally not subject to state regulation.   As with the AMA study, KFF shows that most states have a single dominant insurer and that concentration is very high in almost every state.  (KFF Study)

I am in full agreement that consolidation and concentration in US health insurance markets is an issue that should be addressed.  But the far, far bigger problem is the horizontal and vertical concentration in local provider markets, coupled with the increased tendency of payers to own or employ providers.  While most hospital-oriented health systems are nominally non-profits, they don’t act like it.  They are out of control spenders on executive compensation, administrative staffing, Taj Mahal style buildings and other items.  They have raised prices faster than any other health care sector.  For the one-millionth time I will say, however, that neither of these issues will be addressed until we fix a political system that is dominated by large campaign contributions and extensive lobbying.