Medicare Advantage Markets Lack Competition, Dominated by Top Payers

A study by the American Medical Association (AMA) highlights the consequences for patients and providers.

Medicare Advantage (MA) markets are largely uncompetitive and deserve scrutiny from regulators and lawmakers, according to a study by the AMA.

In the 2022 edition of Competition in Health Insurance: A Comprehensive Study of U.S. Markets, AMA examined health insurers in 380 metropolitan statistical areas (MSAs) in the U.S., including MA plans for the first time. Researchers captured 2021 data from commercial enrollment in preferred provider organization (PPO), health maintenance organization (HMO), point-of-service (POS), consumer-drive health plans (CDHP), and public health exchanges.

The findings reveal just how little competition is present in MA markets, with 79% of MSAs having markets that were ranked as highly concentrated in 2021.

Market competition is based on the Herfindahl-Hirschman Index (HHIs), a calculation that factors in market size and distribution. Markets with an HHI score of less than 1,500 are considered unconcentrated, while an HHI between 1,500 and 2,500 correlates to a moderately concentrated market. An HHI score above 2,500 means the market is highly concentrated and therefore uncompetitive.

In the AMA study, the average HHI for MA markets was 3,331,down from 3,923 in 2017. The median HHI for 2021, meanwhile, was 3,068.

Thirty-four percent of MA markets had one insurer with a share of 50% or more and 6% had one insurer with a share of 70% or more.

The 10 largest insurers by MA market share were UnitedHealth Group (28%), Humana (19%), CVS Health (11%), Kaiser Permanente (7%), Elevance Health (6%), Centene (4%), Cigna (2%), Blue Cross Blue Shield of Michigan (2%), Highmark (1%), and SCAN Health Plan (1%).

The 10 states with the least competitive MA markets were Vermont, North Dakota, Wyoming, Montana, Rhode Island, South Dakota, West Virginia, District of Columbia, Nebraska, and Louisiana.

"High levels of market concentration can result in diminished competitive constraints on insurers," said AMA president Jack Resneck, Jr. "Unchecked market power among insurers is a formula for higher premiums, lower coverage, and inadequate levels of patient care, concerns of great relevance to Medicare Advantage. Most large Medicare Advantage insurers are accused of fraud and flouting the authority of federal agencies.

"The new AMA study shines a light on the lack of competition in Medicare Advantage markets across the country and will help regulators and lawmakers better scrutinize anticompetitive insurer behavior that harms patients and physicians in an industry where exploitative business practices are already commonplace."

In response, America's Health Insurance Plans (AHIP) strongly disputed the study, labeling AMA's report "simply false and wrong."

AHIP pointed to the average number of MA plans per county increasing by 68% over the past decade, as well as the number of competing MA companies increasing by 15%.

"Here is the bottom-line truth: MA and the Exchange marketplaces are prime examples of the government and free market working together to deliver lower costs, more choices, and better outcomes for the American people."