Even though growth in concentration was more restrained among large group plans, there still has been some change in state markets.
Insurance markets in the U.S. continue to be increasingly concentrated, according to a new study from the Government Accountability Office (GAO).
The report looked at three insurance markets: the large group market (health insurance sponsored by large employers), the small-group market (insurance sponsored by small employers), and the individual market (insurance sold directly to individual consumers who lack access to group coverage, usually through the Affordable Care Act's (ACA) individual marketplaces.)
Recommended For You
The data, which covers the years 2011 to 2018, show that in all three areas, market concentration was high, meaning that the majority of people in a specific market had a small number of insurance carriers ("issuers" in the report) to choose from. "Specifically, we found that in each of the three types of markets the three largest issuers held at least 80% of the market share in most states from 2010 through 2016," the researchers said. And in many markets, the study found, the concentration of carriers has been increasing.
Private insurance markets have seen high concentration
The report noted that private health plans cover more than two-thirds of the insured population of the U.S., according to the U.S. Census Bureau. The large group market covers more than 40% of Americans with insurance, while both the small group and individual markets cover between 10% and 20% of those with insurance.
There are multiple reasons for market concentration, the study found. Insurance industry consolidation, in the form of mergers and acquisitions, have worked to increase market share for large insurance carriers. In addition, market concentration can increase when carriers leave a specific market, since this reduces competition among carriers and gives enrollees fewer options to choose from. The concentration of these marketplaces may discourage carriers from marketing a new plan in specific markets as well, the report said.
Individual insurance markets see biggest increases in concentration
The study describes a significant growth in market concentration for Americans on individual insurance plans such as those offered on ACA marketplaces. Although there has been some fluctuation over recent years, the trend has generally been upward. The study estimates that the number of states where the three largest insurers controlled 80% of the market had increased from 33 states in 2011 to 46 states in 2018.
"Of the 34 states with increases [in market consolidation], eight had increases of 5 or more percentage points, with a median increase of 2 percentage points. For example, in Indiana, the state with the largest percentage point increase from 2017 to 2018, two issuers exited the individual market, contributing to more concentration among remaining issuers," the report said.
The increase was even more dramatic in states where the individual market was run by the federal government (a number of states have chosen to run their own ACA exchanges, but approximately 39 states rely on federally-facilitated exchanges).
"From 2015 through 2018, states that already had the top three issuers holding at least 80% market share became even more concentrated, often either because the number of issuers decreased—such that the state only has three or fewer issuers that hold 100% of the market share by default—or the existing issuers accrued the entirety of the market share within a state," the report said. "For example, the number of states with three or fewer issuers increased from 13 states in 2015 to 32 states in 2018."
Small group market concentration increases, large group markets largely hold steady
For employer-based insurance, market concentration news has been somewhat mixed. The GAO researchers saw a significant uptick in market concentration for smaller employers after 2015:
"From 2011 through 2018, the median number of issuers per state decreased from 13 to 5, and the number of states with high concentration increased from 36 states to 46 states," the report said. "We also found that a single issuer held at least 50% market share in 33 states in 2018, even in states that still had many issuers participating in the market. For example, although Michigan had 13 issuers in 2018, a single issuer, Blue Cross Blue Shield of Michigan, held around 63% of the market share."
By 2018, the study found, the median market share of the top three insurers in the small group space was 94%. A single insurer held at least 80% market share for small group plans in 11 states in 2018, an increase from six in 2015.
In contrast, concentration of large group market insurers remained steadier in the U.S. from 2011 to 2018. The median number of issuers per state decreased from 12 carriers in 2011 to nine carriers in 2018, while the number of states with high concentration increased from 40 states in 2011 to 43 states by 2018.
Even though growth in concentration was more restrained among large group plans, there still has been some change in state markets, the study found. "While the large group market remained generally unchanged in recent years, many states experienced fluctuations in the extent of concentration from 2017 through 2018," the report said. "Specifically, 28 states experienced increases in concentration among the three largest issuers, one state remained consistent, and 22 experienced decreases from the prior year."
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
