"As merger rumors involving health insurers swirl, the prospect of future consolidation in the health insurance industry should be more closely scrutinized given the low levels of competition in most health insurance markets," AMA President Gerald E. Harmon said in a statement. "For two decades, the AMA study has been helping researchers, lawmakers, policymakers, and federal and state regulators identify markets where consolidation involving health insurers may cause competitive harm to consumers and providers of care."

The study notes that average market concentration increased between 2014 and 2020. "These markets are ripe for the exercise of health insurer market power, which harms consumers and providers of care," the authors write. "Our findings should prompt federal and state antitrust authorities to vigorously examine the competitive effects of proposed mergers involving health insurers."

Study highlights

The AMA's latest study of competition in commercial health insurance markets revealed the following:

• Almost three-quarters (280) of MSA-level markets were highly concentrated according to federal guidelines.
• 46% (178) of MSA-level markets had one insurer with a share of 50% or more.
• 54% of markets that were already highly concentrated in 2014 became even more concentrated by 2020.
• The top three health insurers with the highest market share in the most MSA-level markets were: Anthem (80 MSAs), Health Care Service Corp. (44 MSAs), and UnitedHealth Group and Blue Cross Blue Shield of Florida (each with 22 MSAs apiece)
• The 10 states with the least competitive commercial health insurance markets were: 1. Alabama, 2. Michigan, 3. Louisiana, 4. South Carolina, 5. Hawaii, 6. Kentucky, 7. Alaska, 8. Illinois, 9. North Dakota, and 10. Oklahoma.
• A total of 14 states had one health insurer with a share of 50% or more of the commercial health insurance market.

The study focused on the following two questions:

1. Are health insurance markets competitive or do health insurers possess market power?

2. Are proposed mergers involving insurers likely to maintain, enhance, or create such power?

"These are important questions of public policy because the use of market power harms society in both output and input markets," the study notes. "When an insurer exercises market power in its output market (the sale of insurance coverage), premiums are higher and quantity of coverage is lower than in a competitive market. When an insurer exercises market power in its input market (e.g., physician services), payments to providers and the quantity of health care are below competitive levels. In short, the exercise of market power adversely affects health insurance coverage and health care."

Read more: 

• A new explanation for why U.S. health care spending is so high
• Monopoly-like consolidation common in health care, study says
• Vertical integration driving health care consolidation