Competition in healthcare research

The Economic and Health Policy Research Division conducts original research into competition in the health insurance market. It has also launched a study on the pharmacy benefit manager (PBM) market.

A key public policy issue is whether the health insurance market is competitive, or whether insurers have market power, which can harm consumers and health care providers. A useful indicator of competition and market power is market concentration. The US Department of Justice and the Federal Trade Commission are investigating concentrations in the valuation of proposed mergers between companies.

One of the division’s most important initiatives is the annual health insurance competition (CHI) Research. This yearly updated study is the only publication of its kind. It is based on analysis of unique enrollment data from a single data source for health insurers in all US states and metropolitan statistical areas (MSAs). The department also conducted an analysis of past and proposed mergers between health insurers.

This year, the department began investigating the PBM market. Using its own registry data on marketed drug coverage from the same data sources used for the CHI study, the division published a paper as part of Prospects for policy research The (PRP) series aims to shed light on this understudied market.

Update for 2022 Competition in Health Insurance: A Comprehensive Study of the US Market (PDF) presents 2021 data on the degree of competition in the private health insurance market, and for the first time in the Medicare Advantage market. It is intended to help identify areas where consolidation involving health insurers could cause anti-competitive harm to consumers and providers.

The study reports the market share of the two largest insurance companies in the United States, as well as their market concentration (HHI) at the state and MSA levels.

Key findings for the 2022 update include:

commercial market

  • 75% (287) of the MSA level market is highly concentrated (HHI>2,500) in 2021, up from 71% in 2014.
  • The average HHI across the MSA level market in 2021 was 3504.
  • 58% of the market experienced an increase in HHI between 2014 and 2021. In these markets, the average increase was 540 points.
  • Of the markets that were not highly concentrated in 2014, 30% experienced an HHI increase large enough to be in the highly concentrated category by 2021.
  • In 91% (349) of MSAs, at least one insurer held a commercial market share of 30% or more, and in 48% (183) of MSAs, one insurer had a share of at least 50%.
  • Blue Cross Blue Shield (BCBS) insurers have the largest state-level market share in 40 states.
  • BCBS insurers had the largest MSA level market share at 81% (311) of MSAs.
  • Anthem has the largest MSA level market share with 21% (82) of MSAs.
  • At the national level, UnitedHealth Group was the largest private health insurer in the United States and Centene was the largest insurer on the exchange.


Maps from research

Medicare Advantage Market

  • 79% (299) of the MSA level market is highly concentrated (HHI>2,500) in 2021, up from 87% in 2017.
  • The average HHI across the MSA level market in 2021 was 3331.
  • In 91% (347) of MSAs, at least one insurer held a market share of 30% or more, and in 34% (131) of MSAs, one insurer had a share of at least 50%.
  • At a national level, UnitedHealth Group was the largest health insurer in the United States.

Maps from research

This PRP uses new data on over-the-counter drug coverage periods in 2020 based on five PBM features to: Competition in the commercial PBM market and vertical integration between health insurers and PBM (PDF) presents a descriptive analysis of the PBM market and the provision of PBM services to health insurers. It reports on the 10 largest US commercial PBM and pharmaceutical insurers at a national level. The paper also presents the two largest PBM market shares and concentration levels (HHI) of the market at every state and MSA level. Finally, we quantify the degree of vertical integration between the health insurer and his PBM.

The main findings of this paper are:

  • At the national level, the top four PBMs offer a total of 66% of commercial drug life rebate negotiations. The results are similar for retail network management and claims adjudication.
  • Of the top 10 PBMs offering rebate negotiations, 6 are used exclusively by one insurer or set of insurers (Bruce).
  • For the other two PBM functions, formulary management and benefit design, approximately 37% of drug life is managed ‘in-house’ by insurers.
  • The average HHIs in the state-level and MSA-level rebate negotiation markets are 3746 and 4103 respectively. The numbers are similar for the retail network management and billing arbitrage markets.
  • At the national level, 69% of commercial drug life comes from vertically integrated insurers. State and MSA averages are slightly lower (63% vs. 65%), but there is significant variation between states and MSAs.

The AMA conducted an analysis (see below) of the impact of the blocked Anthem-Cigna and Aetna-Humana merger on the commercial market and the potential impact of the Aetna-Humana merger on the Medicare Advantage market. Analysis revealed that each merger was likely anti-competitive in a number of markets across the United States.

You can read more about our successful efforts to stop the AMA here. Merger of Anthem-Cigna and Aetna-Humana.

this paper (PDF) Examines the relationship between concentration and price in the health insurance market. This is a case study of his 2008 merger between UnitedHealth Group and Sierra Health Services.

We found that health insurance premiums in the Nevada market increased 13.7% after the merger. The findings suggest that the merging parties took advantage of the market power they gained from the merger.

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