Competition in health care research

The Division of Economic and Health Policy Research (Divison) conducts independent research on competition in health insurance, pharmacy benefit manager (PBM) markets and hospital markets. 

A key question of public policy is whether health insurance markets are competitive or whether insurers have market power, which can harm consumers and health care providers. One of the Division's most significant efforts is the annual Competition in Health Insurance (CHI) study. This annually updated study is the only publication of its kind. It is based on an analysis of unique enrollment data from a single data source for health insurers in all states and metropolitan statistical areas (MSAs) of the U.S. The Division has also conducted analyses of past and proposed mergers among health insurers.

The Division also conducts research on PBM markets. Using unique enrollment data on drug coverage lives from the same data source used for its CHI study, the Division has published research as part of its Policy Research Perspectives (PRP) series that aims to shed light on this understudied market. This year the division began conducting research on hospital markets. Using data from the American Hospital Association (AHA), it is assessing competition in hospital markets also as part of its PRP series.

A useful indicator of competition and market power is market concentration. The U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) examine concentration in their evaluation of proposed mergers between firms. The DOJ and FTC issued new merger guidelines on Dec. 18, 2023, which lowered the threshold for a market to be considered “highly concentrated” from 2,500 to 1,800. The previous Horizontal Merger Guidelines were from 2010. The Division’s studies were based on the new 2023 guidelines.

The 2024 update to Competition in Health Insurance: A Comprehensive Study of U.S. Markets (PDF) presents 2023 data on the degree of competition in commercial and Medicare Advantage health insurance markets. It is intended to help identify areas where consolidation involving health insurers may cause anticompetitive harm to consumers and providers of care. 

The study reports the two largest insurers’ market shares and the concentration levels (HHIs) for state- and MSA-level markets in the U.S. It finds that the vast majority of health insurance markets remain stubbornly highly concentrated and at risk for insurer mergers to substantially lessen competition. Blue Cross Blue Shield (BCBS) insurers are the largest insurers in commercial markets, and UnitedHealth Group is the giant in Medicare Advantage.

Key findings from the 2024 update include:

Commercial markets

• Ninety-five percent (364) of MSA-level markets were highly concentrated (HHI>1,800) in 2023—the same proportion as in 2014, based on the 2023 Merger Guidelines.
• The average HHI across MSA-level markets was 3458 in 2023.
• In 89% (339) of MSAs, at least one insurer held a commercial market share of 30% or greater, and in 47% (181) of MSAs, one insurer's share was at least 50%.
• A BCBS insurer had the largest state-level market share in 41 states.
• A BCBS insurer had the largest MSA-level market share in 83% (317) of MSAs.
• Elevance Health (a BCBS insurer) had the largest MSA-level market share in 21% (80) of MSAs.
• At the national level, UnitedHealth Group is the largest commercial health insurer in the U.S. and Centene is the largest insurer in the exchanges.

Maps from the study

• Ten states with the least competitive commercial health insurance markets, 2023 (PDF)
• Ten states with the least competitive exchanges, 2023 (PDF)
• Market share of the largest commercial insurer in each state, 2023 (PDF)

Medicare Advantage markets

• Ninety-seven percent (372) of MSA-level markets were highly concentrated (HHI>1,800) in 2023—down from 99% in 2017, based on the 2023 Merger Guidelines.
• The average HHI across MSA-level markets was 3129 in 2023.
• In 91% (347) of MSAs, at least one insurer held a market share of 30% or greater, and in 30% (116) of MSAs, one insurer's share was at least 50%.
• At the national level, UnitedHealth Group is the largest health insurer in the U.S.
• UnitedHealth Group had the largest MSA-level market share in 43% (165) of MSAs, and Humana was the biggest in 22% (84) of MSAs.

Maps from the study

• Ten states with the least competitive Medicare Advantage markets, 2023 (PDF)
• Market share of the largest Medicare Advantage insurer in each state, 2023 (PDF)

Using 2022 data on prescription drug plan (PDP) lives and the pharmacy benefit managers (PBM) used by insurers to perform five PBM functions, this paper titled Competition in PBM Markets and Vertical Integration of Insurers with PBMs: 2024 Update (PDF) presents a descriptive analysis of PBM markets and the provision of PBM products to insurers. It reports the ten largest PBMs and drug insurers in the U.S. at the national level. The paper also summarizes concentration levels (HHIs) in PDP-region-level PBM markets. Finally, it quantifies the extent of vertical integration of insurers with PBMs.

This is an update to the original paper published in 2022 and its 2023 update, both of which focused on commercial PDP coverage lives using data for 2020 and 2021. This current edition expands and enriches the analysis by adding Medicare Part D PDP lives, including both Medicare Advantage PDP and standalone PDP.

Key findings from the paper include:

• In 2022, the four largest PBMs at the national level [CVS Health, OptumRx, Express Scripts, and Prime Therapeutics] provided rebate negotiation services for a collective 70% of drug lives. CVS Health is the largest PBM with a 21.3% share. The market shares and rankings are similar for retail network management and claims adjudication. 
• For the other two PBM functions—formulary management and benefit design—about 35% of drug lives are managed by insurers “in house.” For the first three PBM functions (above), about 1% to 2% of lives are managed in house. 
• With regard to local competition among PBMs providing rebate negotiation, retail network management and claims adjudication, the average HHI across PDP regions is around 2400. 
• At least 82% of PDP-region-level PBM markets are highly concentrated (HHI>1800) across those 3 PBM functions, based on the 2023 Merger Guidelines.
• At the national level, 72% of drug lives are with an insurer that is vertically integrated with a PBM. This varies by payer-type status, with 69% of commercial lives being vertically integrated, compared to 77% in Medicare Part D. In some PDP regions, relatively few lives are vertically integrated while in others almost all are.

Using data from the American Hospital Association, this paper titled Competition in Hospital Markets, 2013-2021 (PDF) analyzes shares of hospitals and market concentration (HHIs) levels in MSA-level markets across the U.S. It also estimates the extent of hospital membership in systems, and it presents the two largest hospital market shares and HHIs in each MSA for 2021. Market shares pertain to a system if a hospital belongs to one. In the findings below, hospital refers to the system in such cases.

Key findings from the paper include:

• Ninety-nine percent (384) of MSA-level markets were highly concentrated (HHI>1,800) in 2021, based on the 2023 Merger Guidelines.
• The weighted average HHI across markets was 4062 in 2021—up from 3722 in 2013.
• In 97% (379) of MSAs, at least one hospital held a market share of 30% or greater, in 77% (300) of MSAs, one hospital's share was at least 50%, and in 43% (168) of MSAs, a single hospital’s market share was 70% or greater.
• In 2021, 78% of hospitals were members of systems—up from 70% of hospitals in 2013.

AMA conducted analyses (see below) of the likely impact that the blocked Anthem-Cigna and Aetna-Humana mergers would have had on commercial markets and of the Aetna-Humana merger on Medicare Advantage markets. The analyses found that each of the mergers would have likely been anticompetitive in numerous markets across the U.S.

• Effects of Anthem-Cigna merger on commercial markets (PDF)
• Effects of Aetna-Humana merger on commercial markets (PDF)
• Effects of Aetna-Humana merger on Medicare Advantage markets (PDF)

Read more about the AMA’s successful efforts to block the Anthem-Cigna and Aetna-Humana mergers.

This paper (PDF) examines the association between health insurance market concentration and prices. It is a case study of the 2008 merger between UnitedHealth Group and Sierra Health Services.

It found that health plan premiums in Nevada markets increased by 13.7% after the merger. The findings suggest that the merging parties exploited the market power gained from the merger.

Competition in Commercial PBM Markets and Vertical Integration of Health Insurers with PBMs

Using novel 2020 and 2021 data on commercial drug coverage lives and the PBMs used by insurers to perform five PBM functions, this paper titled Competition in Commercial PBM markets and Vertical Integration of Health Insurers with PBMs: 2023 Update (PDF) presents a descriptive analysis of PBM markets and the provision of PBM services to health insurers. It reports the ten largest commercial PBMs and drug insurers in the U.S. at the national level. The paper also summarizes concentration levels (HHIs) in state- and MSA-level PBM markets and presents the two largest PBM market shares and HHIs for all state-level markets. Finally, it quantifies the extent of vertical integration of health insurers with PBMs.