Washington, D.C. — Over the past two decades, America’s health care industry has experienced substantial consolidation. With only a few large companies dominating the U.S. health insurance landscape, there are concerns about how insurer consolidation may affect health care costs and accessibility. A new Center for American Progress report 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.
The increased levels of consolidation among private payers, driven by vertical integration and market specialization, are undermining competition and fueling high health care costs. To address these challenges, this report outlines the following federal policy recommendations:
- Create ownership structure transparency requirements. In response to increasingly complex vertical consolidation structures, Congress should require that insurers report to the U.S. Department of Health and Human Services to enhance transparency, reveal potential conflicts of interest, and track patterns of anticompetitive behaviors.
- Use analyses of payer profits and premium trends to guide regulation. Congress should boost resources to enable federal antitrust enforcement agencies to conduct regular qualitative, retrospective analyses to document the relationship between insurer profits and premiums.
- Reform medical loss ratio reporting requirements to ensure that plans are meeting the intent of the Affordable Care Act. Congress should consider revising medical loss ratio expenditure reporting to require vertically integrated insurers to provide clarity around allocation of various profit streams—such as the profitability of a pharmacy benefit manager (PBM).
- Establish market segment-specific concentration thresholds that would trigger additional regulatory intervention. Complementing 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.
- 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.
“In recent years, insurer consolidation has been marked by countless mergers, acquisitions, vertical integration, and market specialization, creating increasingly concentrated and less competitive health insurance markets across the country,” said Natasha Murphy, director of Health Policy and author of the report. “We must take steps to combat insurers’ growing interests to strengthen their power in marketplaces to prevent even further insurer consolidation.”
Read the report: “Trends and Consequences in Health Insurer Consolidation” by Natasha Murphy
For more information or to speak with an expert, please contact Sarah Nadeau at [email protected].