Cost & Quality Problems

Health Insurer Consolidation

While economists and others have been primarily worried about the impact of hospital and physician consolidation on prices, choice and quality, health insurers have also been growing more consolidated—with mixed results for consumers.Studies show that a majority of healthcare markets are highly or super-concentrated in terms of insurers.1  

While some studies show that larger insurers are able to extract better price concessions from powerful hospitals and other providers,2 there is little evidence that these savings are passed on to consumers.3 Moreover, concentrated insurer markets can have downsides. The more consolidated an insurer market, the more difficult it is for new entrants and the less likely that markets will become more competitive. In addition, some evidence shows that the smaller the number of health plans to choose from, the higher the premiums consumers must pay.4 

Policymakers have other “tools” in their tool box to address excess provider prices and should not rely on insurers dominating the local market. Proposed health plan mergers should receive careful scrutiny from regulators. Moveover, when faced with already consolidated insurer markets, local regulators should consider policies to ensure that the health plan products are of high value to consumers, including medical loss ratio regulations.



1. Fulton, Brent D., Daniel R. Arnold and Richard M. Scheffler, "Market Concentration Variation of Health Care Providers and Health Insurers in the United States," Commonwealth Fund (July 30, 2018). See also: "Competition in Health Insurance: A comprehensive study of U.S. markets," American Medical Association (2018). 

2. Roberts, Eric T., Michael E. Chernew and J. Michael McWilliams, "Market Share Matters: Evidence of Insurer And Provider Bargaining Over Prices," Health Affairs, Vol. 36, No. 1 (January 2017). 

3. Scheffler, Richard M., "Insurer Market Power Lowers Prices in Numerous Concentrated Provider Markets," Commonwealth Fund (September 6, 2017). 

4. Department of Health and Human Services, "Competition and Choice in the Health Insurance Marketplaces 2014-2015: Impact on Premiums," (July 2015). 

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