Key Insights

• A recent study by the American Medical Association (AMA) analyzing “competition in health insurance markets across the United States” concluded that “the majority of U.S. commercial health insurance markets are highly concentrated, as well as an upward trend in average market concentration between 2014 and 2019.”
• Twenty-five percent of markets that were not previously highly concentrated became so during the five-year period that the study analyzed. 
• CMS Administrator Seema Verma reported that premiums for HealthCare.gov plans will decrease in 2021. 

Report: U.S. Healthcare Insurance Market Highly Concentrated

The AMA’s latest report on “Competition in Health Insurance” found that “on net, markets are more concentrated than they were five years ago,” adding that “the share of markets that are highly concentrated increased from 71 percent to 74 percent.” Furthermore, a quarter of markets that were not highly concentrated in 2014 were deemed highly concentrated by 2019. 

“High concentration levels in health insurance markets are largely the result of consolidation (i.e., mergers and acquisitions), which can lead to the exercise of market power and, in turn, harm to consumers and providers of care,” the report explained. 

In a statement about the report, AMA President Susan Bailey, MD, said: “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.”

The report emphasized the need for retrospective studies of health insurer consolidation to predict “the competitive effects of mergers” and assist the development of merger-enforcement policies. “Our findings should prompt federal and state antitrust authorities to vigorously examine the competitive effects of proposed mergers between health insurers,” researchers noted. 

ACA Plan Premiums to Decrease in 2021

While the AMA report cautions that consolidation may cause “health insurer monopoly power,” which in turn may “raise and maintain premiums above competitive levels,” certain premiums will fall in 2021. The Centers for Medicare and Medicaid Services (CMS) reported that “the trend of lower premiums and increased issuer participation for HealthCare.gov will continue for [the] 2021 year.” Additionally, “issuer participation will also increase for the third year in [a] row, which represents a dramatic increase in choice for consumers. As more insurers offer coverage, the percentage of HealthCare.gov enrollees with access to only one issuer is decreasing from 29 percent in 2018 to 4 percent in 2021, and more than three-quarters of HealthCare.gov enrollees will have access to at least three issuers in 2021.”

Although premiums for these Exchange plans will decrease, new data indicates that employer-sponsored health insurance premiums “continue to rise faster than wages [and] inflation.” The Kaiser Family Foundation’s survey discovered that “annual premiums for employer-sponsored family health coverage reached $21,342 this year, up 4 percent from last year.” The survey concluded that the “annual change in premiums is similar to the year-to-year rise in workers’ earnings (3.4 percent) and inflation (2.1 percent), though over time what employers and workers pay toward premiums continues to rise more quickly than wages and inflation.” Despite these increases, 57 percent of employers “will make no changes whatsoever to reduce cost in their medical plans in 2021,” according to a survey by Mercer. 

On the other hand, some employers are transitioning to self-funded insurance. As Privia Health’s Vice President of Sales & Marketing Operations Eric Schumann explains, “Self-insurance is one way for employers to lower healthcare spending while meeting employees’ needs.”

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