AMA Study: Competition shrinks as health insurance markets concentrate

Competition and choice are seemingly going the way of the dodo for many patients as commercial health markets continue to concentrate.

According to the American Medical Association (AMA) analysis Competition in Health Insurance: A Comprehensive Study of U.S. Markets, between 2014 and 2019 the share of markets that were highly concentrated increased from 71 percent to 74 percent and 52 percent of highly concentrated markets in 2014 grew even more concentrated five years later.

These conditions can negatively affect the amount reimbursed for medical services to physicians and other providers.

"When an insurer exercises market power in its input market (e.g., physician services), payments to health care providers are below competitive levels," the introduction to the study says.

It is important to note that when payers have competitive sway over an area it also harms physicians, not just patients, in that the insurer can pay lower reimbursements because physicians don't have a choice but accept patients on those monopsony-like health plans.

“For many of the 70 million Americans who live in highly concentrated health insurance markets, a lack of competition is a problem that keeps getting worse as consumers have more limited health insurance options to choose,” AMA President Susan R. Bailey, MD, says in a news release accompanying the study. “The AMA strongly encourages a dialogue among regulators, policymakers, lawmakers, and others about the need for a better, more open and competitive marketplace to benefit patients and the physicians who care for them.”

The analysis looked at all 384 metropolitan statistical areas (MSAs), the 50 states, and the District of Columbia using the Herfindahl-Hirschman Index (HHI). Those markets which exceed 2500 points are considered highly concentrated, according to federal guidelines.

The release lays out the health insurance market in Elizabethtown-Fort Knox, Ky., as an illustration of the increased stranglehold certain payers hold in some areas. This MSA market had an HHI of 3,534 in 2014, which exceeds federal thresholds for a highly concentrated market by more than 1,000 points. That number jumped by 1,625 to an HHI of 5,159.