AMA: Nearly 70% of payer markets ‘highly concentrated’

Dive Brief:

  • A new American Medical Association (AMA) report found that one health insurer has at least a 50% market share in 43% of metropolitan areas. Nearly 90% of markets have at least one insurer with a 30% or greater market share.
  • Anthem, a major Blues payer and one of the largest insurers in the country, had the largest geographic footprint. The payer had the highest market share in 82 metropolitan areas.
  • The report found that 69% of markets are “highly-concentrated.”

Dive Insight:

The AMA study looked at where payer consolidation “may cause anti-competitive harm to consumers and providers of care.”

The authors said market concentration is a “useful indicator of competition and market power” and is an area the U.S. Department of Justice and Federal Trade Commission analyze when evaluating proposed mergers.

The annual report found a further consolidation of markets. The percentage of markets with one dominant insurer increased by 8% over the past two years.

Consolidation of insurers can affect premiums and reimbursements. A recent Health Affairs report found mergers involving hospitals, providers and payers resulted in insurers achieving more bargaining power to reduce provider prices in highly concentrated markets. That report said hospital admission prices were 5% lower in highly consolidated provider and insurer markets compared to those that are not as dense.

The AMA report warned along a similar theme. “We find that the majority of U.S. commercial health insurance markets are highly concentrated. These markets are ripe for the exercise of health insurer market power, which harms consumers and providers of care,” according to the report.

The AMA said major mergers like Anthem-Cigna and Aetna-Humana are reasons why the organization conducts the annual report. Neither merger ultimately happened, but they would have further consolidated the payer market.

The AMA warned about further consolidation. “Our findings should prompt federal and state antitrust authorities to vigorously examine the competitive effects of proposed mergers between health insurers. Given the uncertainty in predicting the competitive effects of consolidation, some mergers that are allowed cause competitive harm,” according to the report.

Anthem’s growing market share comes as the payer is creating policies that attempt to bring down health costs by pushing services away from hospital inpatient settings. Anthem announced this year that it won’t reimburse for emergency department visits deemed unnecessary and will no longer pay for MRIs and CT scans at hospitals in 13 states unless the tests are an emergency.

Given Anthem’s footprint, the payer’s new policies may mean other payers competing in the same markets will follow suit.

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