By Jeffrey H. Brochin, J.D.
Enrollment in private health insurance plans in the individual, small group, and large group markets has historically been highly concentrated among a small number of issuers, and this pattern continued in 2017 and 2018.
The U.S. Government Accountability Office (GAO) found that overall individual and small group markets have become more concentrated in recent years. The national median market share of the top three issuers increased by approximately 8 and 5 percentage points, respectively, from 2015 through 2018. With these increases, the median concentration was at least 94 percent in both markets in 2018 (GAO Report, GAO-21-34, November 13, 2020).
Most common form of health insurance. Private health insurance is the most common form of health insurance coverage in the United States, covering over two-thirds of the insured population in 2018, according to the U.S. Census Bureau. The majority of privately insured individuals are covered through group plans, either small group (for small employers) or large group (for large employers). Small and large employers may offer fully insured group plans or self-funded group plans, by setting aside funds to pay for employee health care. Most small employers purchase fully insured plans, while most large employers self-fund at least some of their employee health benefits. Americans without access to group health coverage, such as those with employers that do not offer health coverage, may choose to purchase it directly from an issuer or through an exchange as part of the individual market.
Factors affecting market concentration. Several factors can affect concentration in health insurance markets. High concentration levels have often been the result of consolidation—mergers and acquisitions—among existing issuers. However, concentration can also increase if existing issuers leave the market, thereby reducing the number of issuers from which enrollees can purchase coverage. In addition, concentration can persist because of the difficulty for new issuers to enter the market. For example, new issuers that do not yet have large numbers of enrollees may have greater challenges negotiating discounts with health care providers, which may encourage issuers to consolidate in order to attain enough enrollees to gain bargaining power.
The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) included a provision for the GAO to periodically study market concentration. The GAO previously reported that from 2011 through 2016, enrollment in the individual, small group, and large group health insurance markets was concentrated among a few issuers in most states’ markets or exchanges are considered to be highly concentrated if three or fewer issuers held at least 80 percent of the market share. A highly concentrated health insurance market may indicate less issuer competition and could affect consumers’ choice of issuers and the premiums they pay for coverage.
Data. The GAO determined market share in the overall markets using enrollment data from 2017 and 2018 that issuers were required to report annually to CMS. The GAO determined market share in the individual market federally facilitated exchanges in 2018 using enrollment data from CMS. For all analyses, GAO used the latest data available. To describe changes in concentration in the individual, small group, and large group markets in each state, the GAO analyzed 2017 and 2018 Medical Loss Ratio data that the ACA requires issuers to report annually. Data for 2018 were the most recently available data at the time of the analysis. The GAO previously used the same data source to analyze concentration from 2011 through 2016.
What the study found. The GAO study found that enrollment in private health insurance plans has historically been highly concentrated among a small number of issuers, and that this pattern continued in 2017 and 2018. For example: for each market in 2018, at least 43 states (including the District of Columbia) were highly concentrated; and, overall individual and small group markets have become more concentrated in recent years. The national median market share of the top three issuers increased by approximately 8 and 5 percentage points, respectively, from 2015 through 2018. With those increases, the median concentration was at least 94 percent in both markets in 2018.
The GAO found similar patterns of high concentration across the 39 states in 2018 that used federal infrastructure to operate individual market exchanges—marketplaces where consumers can compare and select among insurance plans sold by participating issuers—established in 2014 by the ACA and known as federally facilitated exchanges. From 2015 through 2018, states that were already highly concentrated became even more concentrated, often because the number of issuers decreased or the existing issuers accrued the entirety of the market share within a state.
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