Trends and Consequences in Health Insurer Consolidation

Over the past two decades, America’s health care industry has experienced substantial consolidation.¹ While provider consolidation often captures significant legislative and oversight attention, the role of insurers in shaping the health care landscape warrants equally rigorous scrutiny. Numerous insurer mergers and acquisitions, an uptick in vertical integration, and increased market specialization have resulted in less competition in insurer markets.² Now, a few large companies dominate the U.S. health insurance landscape, raising concerns about how insurer consolidation may affect health care costs and accessibility.

The federal antitrust enforcement agencies—namely the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ)—and the U.S. Department of Health and Human Services (HHS) have been increasingly focused on this issue, and recent congressional hearings have highlighted the need for greater oversight to allow for competition and protect consumers.³

In March 2024, the FTC, the DOJ, and HHS issued a joint request for information (RFI) about consolidation in health care markets.⁴ This report summarizes and expands on the Center for American Progress’ response to that RFI, reviews market trends from the past two decades, and explores what is known so far about the impacts of insurer consolidation on health care prices, consumer choice, and provider compensation.⁵ The report concludes with federal policy recommendations to address the challenges posed by dwindling competition in health insurance markets.

The mid-2000s were marked by a series of large-scale health care acquisitions that created industry giants with deepened market penetration and expanded geographic reach. This trend included acquisitions by and of major health insurers. Anthem Insurance Co.’s 2004 acquisition of WellPoint Health Networks established Anthem (now Elevance Health), one of the country’s largest health insurance companies by net revenue and enrollment.⁶ That acquisition increased Elevance’s footprint across multiple states, enhancing its influence in both the individual and group insurance markets. According to a 2023 American Medical Association (AMA) analysis, Elevance was the second-largest commercial market health insurer by market share in 2022.⁷ In 2005, UnitedHealth Group acquired PacifiCare Health Systems.⁸ That transaction significantly expanded UnitedHealth’s presence in the Medicare Advantage market—where UnitedHealth is now a dominant player—allowing the company to serve a larger senior population and diversify its product offerings.⁹ Later, in 2013, Aetna acquired Coventry Health Care, which bolstered Aetna’s presence in the Medicaid market by expanding its Medicaid operations from 12 to 16 states and nearly doubling its Medicaid enrollment to more than 2 million people.¹⁰

Consolidation within and between other related entities further accelerated in the second half of the 2010s, as insurers vertically integrated with health care providers, pharmacies, and pharmacy benefit managers (PBMs). For example, in 2017, UnitedHealth Group acquired Surgical Care Affiliates, an operator of ambulatory surgery centers and surgical hospitals in 14 states, as well as DaVita’s primary and urgent care services, which at the time provided care to nearly 1.7 million patients annually across 300 clinics in six states.¹¹ As of 2023, Optum, a noninsurance subsidiary of UnitedHealth, was purportedly the largest employer of physicians in the United States, with roughly 90,000 employed or affiliated physicians and 40,000 advanced practice clinicians.¹² In 2018, Cigna completed its acquisition of PBM Express Scripts.¹³ That same year, in a landmark deal aimed at integrating pharmacy and medical services, CVS Health acquired Aetna.¹⁴ Currently, 4 of the 5 largest PBMs are integrated with an insurer, and nearly 80 percent of PBM markets are highly concentrated.¹⁵

Insurers attempt to deepen their enrollment and penetration in particular market segments—including in Affordable Care Act (ACA) marketplaces, Medicaid, job-based insurance, or Medicare Advantage—as an acquisition strategy. For example, Oscar Health, an insurer founded in 2012, has strategically maximized enrollment in the ACA individual market. In a 2024 earnings call, Oscar Health CEO Mark Bertolini said “the individual market ‘is the fastest growing segment of health insurance’” and that “Oscar is well positioned to capitalize and innovate on the strong market growth.”¹⁶ The self-described “prominent carrier in the ACA marketplace” seeks to grow its existing market share from 13 percent to 18 percent and enter at least 150 new metropolitan statistical areas (MSAs) by 2027.¹⁷

As insurers have begun to specialize in particular market segments, dominant players have emerged. In 2022, UnitedHealth Group and Centene were the largest commercial and ACA marketplace private insurers, each with 14 percent market share.¹⁸ In 2020, five for-profit insurers—Centene, Elevance, UnitedHealth Group, Molina, and CVS Health—together accounted for 50 percent of national Medicaid managed care enrollment.¹⁹ And in 2022, three payers—UnitedHealth Group, Humana, and CVS/Aetna—captured a significant share of the rapidly growing Medicare Advantage market, which serves millions of older Americans and now accounts for more than half of Medicare enrollment.²⁰

This kind of market specialization can drive further consolidation as insurers seek to strengthen their new market positions. For example, in 2015, Aetna announced its intent to acquire rival Humana in what, at the time, would have been the largest-ever acquisition in the health insurance industry.²¹ Fierce Healthcare described Humana as “a prime acquisition target” due to its large presence in the Medicare Advantage market, and the acquisition would have nearly tripled Aetna’s Medicare Advantage business.²² The proposed transaction faced antitrust scrutiny and was challenged and ultimately blocked in 2017 by the DOJ on the basis that it would have reduced competition in both the Medicare Advantage and ACA marketplaces.²³ More recently, dominant Medicare Advantage payer UnitedHealth has invested in further vertical integration specific to the Medicare market, acquiring home health providers Landmark Health and LHC Group in 2021 and 2023, respectively, and care coordination tool NaviHealth in 2020.²⁴

Mergers and acquisitions, vertical consolidation, and market specialization have all contributed to insurance markets becoming more concentrated and less competitive.

According to the AMA, in 2022, among the nation’s largest MSAs, 73 percent of commercial markets, 71 percent of Medicare Advantage markets, and 90 percent of ACA markets were highly concentrated.²⁷ Other studies have found similar results: A Commonwealth Fund analysis found greater concentration in Medicare Advantage markets between 2009 and 2017 driven partially by insurance consolidation.²⁸

High levels of concentration and market dominance directly affect how health care services are financed, managed, and delivered.

Insurers contend that growth through mergers and acquisitions allows them to negotiate more favorable reimbursement rates with providers, ideally leading to reduced prices and cost savings for their members.²⁹ Further, insurers state that by vertically integrating with providers, they gain access to the full care continuum, which facilitates improved care coordination and clinical innovation, or that by integrating with a PBM, they can enhance data capabilities to identify trends, predict costs, and better coordinate medical and drug benefits.³⁰ The evidence does not bear out these assertions, however, suggesting instead that insurers are the primary beneficiary of consolidating transactions, while consumers ultimately face increased prices and diminished choices for care, and some providers or pharmacies wind up undercompensated.³¹

Insurer consolidation reduces the number of available payers in a market, leading to increased market power for the remaining companies. With fewer competitors, consolidated insurers can exert greater influence over health care providers and can leverage their market power to apply downward pressure on prices. Indeed, analyses exploring consolidation activity between 2005 and 2011 found a correlation between insurer market concentration and lower provider prices.³² Yet evidence does not suggest these savings are passed on to consumers in the form of lower premiums and out-of-pocket costs.³³ In fact, an analysis of data from 2007 to 2010 found that premiums increased in certain markets after insurer mergers.³⁴ This is likely because consolidated insurers face less pressure to keep premiums low, since their market power also puts them at a lower risk of losing a significant number of customers to competitors.

As insurer consolidation has intensified, the revenues of several of the nation’s largest health insurance companies have increased. According to a recent Axios analysis, six of the largest for-profit insurers accounted for 30 percent of total U.S. health spending in 2023, and their stock prices rose 719 percent between 2005 and 2023.³⁵ A recent KFF analysis of insurers’ 2024 medical loss ratio (MLR) rebates found that insurers will issue more than $1 billion in rebates across commercial markets in 2024.³⁶ This suggests very high levels of insurer profitability.

Concentrated insurer market power can also harm health care providers and put patient data at risk. For example, providers have expressed concern that insurers in consolidated markets exert monopsony power by reducing provider reimbursement below competitive levels.⁴¹ The February 2024 cyberattack on Change Healthcare, a unit of UnitedHealth Group, resulted in data breaches exposing the personal health information of 100 million people,⁴² and for several months afterward, some providers reported that they were not being compensated in a timely way for their services.⁴³ The scale of the breach was reflective of UnitedHealth Group’s size, which had grown significantly through mergers and acquisitions. In fact, in 2022, the DOJ challenged—though ultimately did not block—UnitedHealth Group’s acquisition of Change Healthcare over harm to competition in both the insurance and the claims data clearinghouse markets.⁴⁴

Insurer consolidation also adversely affects consumer access to care by narrowing insurance and provider network options for patients. Within vertically integrated networks, patients can find themselves restricted to a small set of in-network or preferred providers or retailers, further limiting their choice.⁴⁵ While narrow network designs can lower costs in theory, the evidence suggests they may actually increase costs. For example, a 2023 report found that gross spending per Medicare Advantage beneficiary was 4.6 percent higher in plans issued by insurers that were vertically integrated with other businesses than in plans from insurers that were not vertically integrated.⁴⁶ In addition, as insurers gain market power, business practices such as prior authorization become more prevalent and potentially harmful. Prior authorization is a cost-containment practice by which insurers require providers to obtain approval before certain treatments or procedures can be performed and covered by the plan.⁴⁷ This can delay necessary care, frustrate providers, and negatively affect patient outcomes, particularly in restricted networks where alternative options are limited.⁴⁸ Insurers, especially those that are vertically integrated with health care providers, can leverage prior authorization as a tool to control costs at the expense of patient care.

Policymakers at the state and federal levels are taking executive, regulatory, and legislative action to support competitive health insurer markets and protect consumer interests. In 2021, the Biden-Harris administration issued executive order 14036 establishing “a whole-of-government” effort to promote competition in the American economy and challenged the FTC and the DOJ to address competition in health care markets.⁴⁹Subsequently, the agencies have ramped up oversight and pursued antitrust enforcement, launching an antitrust investigation into UnitedHealth Group in 2024.⁵⁰ In late 2023, the FTC and the DOJ issued finalized “Merger Guidelines” updating their standards for assessing mergers and acquisitions by broadening the definition of highly concentrated markets, setting a lower threshold for identifying significant market concentration shifts, and considering the cumulative impact of multiple acquisitions.⁵¹ As described earlier, in March 2024, the FTC, the DOJ, and HHS also issued an RFI on private equity and vertical consolidation in health care markets—seeking to understand the effects of transactions on health care quality, access, and costs—that generated more than 2,000 comments.⁵² In May of that year, the DOJ Antitrust Division announced a new Task Force on Health Care Monopolies and Collusion.⁵³ Also in May 2024, Sen. Amy Klobuchar (D-MN) reintroduced the Competition and Antitrust Law Enforcement Reform Act (S. 4308), which seeks to bolster antitrust enforcement by increasing resources for federal agencies and strengthening prohibitions against anticompetitive mergers and conduct.⁵⁴

At the state level, lawmakers are pursuing and enacting policies to address consolidation and improve competition, including by implementing legislation that requires notice and approval for mergers and acquisitions; enhancing the role of state attorneys general in oversight and monitoring of market behavior; and establishing global budgets to manage costs.⁵⁵ During the 2024 legislative session, several states—including Oregon, Minnesota, and Florida—introduced bills strengthening their bans on corporate practice of medicine to limit corporate ownership of medical practices.⁵⁶

CAP recommends the following federal legislative and regulatory actions to build on this progress and to further address insurer consolidation and protect consumers:

• Create ownership structure transparency requirements. In response to increasingly complex vertical consolidation structures, Congress should require that insurers report to HHS. Newly revised Hart-Scott-Rodino Act rules require that merging parties in all industries provide detailed information about the chain of control of acquiring firms and about the ultimate parent of the acquiring firm.⁵⁷ If information of this sort—together with information on affiliations and financial relationships between entities such as providers or PBMs—were available on an annual basis, it would help identify potentially problematic conflicts of interest and limitations on competition. Disclosures to consumers through provider network directories would help consumers understand any financial relationships that their providers may have with their insurer.

  Enhanced transparency is essential for revealing potential conflicts of interest and supporting policymakers in tracking patterns of anticompetitive behaviors. The Lower Costs, More Transparency Act (H.R. 5378), which was introduced by Rep. Cathy McMorris Rodgers (R-WA) and passed the House of Representatives in 2023, would require Medicare Advantage entities to report provider acquisitions to HHS.⁵⁸ Sen. Edward Markey’s (D-MA) draft Health Over Wealth Act would require private equity and for-profit health providers to disclose financial and operational data to HHS.⁵⁹

• Use analyses of payer profits and premium trends to guide regulation. Congress should boost resources to enable federal antitrust enforcement agencies to conduct regular quantitative, retrospective analyses to document the relationship between insurer profits and premiums. This enhanced capacity would provide a stronger foundation for future legislative and regulatory intervention.⁶⁰ 
• Reform medical loss ratio reporting requirements to ensure that plans are meeting the intent of the ACA. Congress should consider revising MLR expenditure reporting to require vertically integrated insurers to provide clarity around allocation of various profit streams—such as the profitability of a PBM that an insurer may own, for example.⁶¹ As the ACA intended, insurers should be allocating the vast majority of expenses to patient care, not to propping up profits across affiliated companies.
• Establish market segment-specific concentration thresholds that would trigger additional regulatory intervention. To complement existing measures of market concentration such as the Herfindahl-Hirschman Index, federal regulators could establish thresholds for consolidation that would identify an insurer as controlling too much of a particular market segment, such as Medicare Advantage or Medicaid.⁶² Current guidelines identify thresholds for markets but not by market segment.⁶³
• Prohibit certain ownership structures. Federal legislation prohibiting certain ownership structures, such as insurers owning PBMs or providers, could circumvent further vertical integration and potentially unwind some existing consolidated relationships. Some policy experts have called for a health care law parallel to the Glass-Steagall Act, which required the separation of commercial and investment banking activities to prevent conflicts of interest.⁶⁴ Such prohibitions for health insurers could reduce anticompetitive behavior and conflict of interest practices that harm consumers.⁶⁵

Insurer consolidation—which in recent years has been marked by countless mergers, acquisitions, vertical integration, and market specialization—has led to increasingly concentrated and less competitive health insurance markets in the United States. Consolidation appears to drive up health care prices while also restricting consumer choice. This suggests that the primary, if not the only, beneficiaries of these business decisions are the insurers themselves.

Federal and state policymakers are increasingly focused on addressing this issue. By implementing measures such as requiring far greater transparency in ownership structures, using analyses of payer profits and premium trends to drive regulation, reforming medical loss ratio reporting, and prohibiting certain ownership structures for vertically integrated insurers, federal policymakers can intervene to preserve the remaining competition in insurance markets and shield patients from the potential adverse effects of future consolidations.

The author would like to thank Alexandra Thornton, Marc Jarsulic, Andrea Ducas, Emily Gee, Claire Koyle, and external experts who provided thoughtful insight and input that informed this report.