AcademyHealths National Health Policy Conference Washington DC | - - PowerPoint PPT Presentation

AcademyHealth’s National Health Policy Conference Washington DC | February 6, 2018 Market Consolidation in the US Health Insurance Industry Bradley Herring, PhD Associate Professor

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2015-2017’s Proposed Mergers to Increase Insurance Market Concentration

Taken from: Weaver, 2015, “Insurers Playing a Game of Thrones,” Wall Street Journal.

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Joint Distribution of Insurer (x-axis) Versus Hospital (y-axis) HHI Measures

Note: Each dot is an employer in the 2006-2011 KFF/HRET data. Taken from: Trish E and Herring B, 2015, “How Do Health Insurer Market Concentration and Bargaining Power with Hospitals Affect Health Insurance Premiums?” Journal

• f Health Economics.

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Competitive: HHI < 15 (x 100) Moderately Concentrated: 15 < HHI < 25 Highly Concentrated: 15 < HHI < 25

Insurer Concentration: 3.3% obs .under 15 HHI, 43.4% 15-25 HHI, 29.0% 25-35 HHI, and 24.2% over 35 HHI.

Taken from: Trish E and Herring B, 2015, “How Do Health Insurer Market Concentration and Bargaining Power with Hospitals Affect Health Insurance Premiums?” Journal

• f Health Economics.

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Lower Overhead & Higher Provider Prices (But Can’t Bargain) Lower Overhead & Lower Provider Prices (Already Competitive)

How Are Premiums Determined? Negotiate Provider Prices and Add Administrative Overhead

Note: Administrative overhead comprised of insurer profits and other administrative costs. Taken from: Trish E and Herring B, 2015, “How Do Health Insurer Market Concentration and Bargaining Power with Hospitals Affect Health Insurance Premiums?” Journal

• f Health Economics.

Higher Overhead & Moderate Provider Prices (Bilateral Bargaining) Higher Overhead & Lower Provider Prices (Already Competitive)

Increasing Insurer Concentration → Increasing Hospital Concentration →

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Lower Overhead & Higher Provider Prices (But Can’t Bargain) Lower Overhead & Lower Provider Prices (Already Competitive)

How Are Premiums Determined? Negotiate Provider Prices and Add Administrative Overhead

Note: Administrative overhead comprised of insurer profits and other administrative costs. Taken from: Trish E and Herring B, 2015, “How Do Health Insurer Market Concentration and Bargaining Power with Hospitals Affect Health Insurance Premiums?” Journal

• f Health Economics.

Higher Overhead & Moderate Provider Prices (Bilateral Bargaining) Higher Overhead & Lower Provider Prices (Already Competitive)

Increasing Insurer Concentration → Increasing Hospital Concentration →

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Lower Overhead & Higher Provider Prices (But Can’t Bargain) Lower Overhead & Lower Provider Prices (Already Competitive)

How Are Premiums Determined? Negotiate Provider Prices and Add Administrative Overhead

Note: Administrative overhead comprised of insurer profits and other administrative costs. Taken from: Trish E and Herring B, 2015, “How Do Health Insurer Market Concentration and Bargaining Power with Hospitals Affect Health Insurance Premiums?” Journal

• f Health Economics.

Higher Overhead & Moderate Provider Prices (Bilateral Bargaining) Higher Overhead & Lower Provider Prices (Already Competitive)

Increasing Insurer Concentration → Increasing Hospital Concentration →

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Lower Overhead & Higher Provider Prices (But Can’t Bargain) Lower Overhead & Lower Provider Prices (Already Competitive)

How Are Premiums Determined? Negotiate Provider Prices and Add Administrative Overhead

Note: Administrative overhead comprised of insurer profits and other administrative costs. Taken from: Trish E and Herring B, 2015, “How Do Health Insurer Market Concentration and Bargaining Power with Hospitals Affect Health Insurance Premiums?” Journal

• f Health Economics.

Higher Overhead & Moderate Provider Prices (Bilateral Bargaining) Higher Overhead & Lower Provider Prices (Already Competitive)

Increasing Insurer Concentration → Increasing Hospital Concentration →

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What We Did and Found in Trish and Herring (JHE 2015)

► Regressed fully-insured employment-based premiums (KFF/HRET 2006-2011) onto two

Insurer HHIs (one capturing overhead, one capturing provider prices) and a Hospital HHI

► Found for an 800 point HHI increase (e.g., “five-to-four” merger of equal-share firms): ► Insurer HHIEMP (overhead vs. employers): 1.7% increase ($78) ► Insurer HHIHSP (prices vs. hospitals): 1.9% decrease ($90) ► Hospital HHI (prices vs. insurers): 1.5% increase ($67) ► Implies that insurer consolidation reduces provider prices, but insurers don’t pass those

savings along to consumers and instead increase overhead (but at least not any further)

Taken from: Trish E and Herring B, 2015, “How Do Health Insurer Market Concentration and Bargaining Power with Hospitals Affect Health Insurance Premiums?” Journal of Health Economics.

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Insurer Participation on ACA Exchange Marketplaces: 2018

Taken from: Kaiser Family Foundation, 2018, Insurer Participation on ACA Marketplaces, 2014-2018.

1 insurer (26%) 3+ insurers (48%) 2 insurers (27%)

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Insurer Participation on ACA Exchange Marketplaces: 2014

Taken from: Kaiser Family Foundation, 2018, Insurer Participation on ACA Marketplaces, 2014-2018.

1 insurer (6%) 2 insurers (18%) 3+ insurers (76%)

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Additional Considerations for Various Insurance Markets

► Fully-Insured Group Market (earlier slides) ► Individual Exchange Marketplaces (earlier slides) ► Why was initial entry by insurers low? Why did insurers exit? ► Implications worse than group market: no provider price negotiation, tax credit’s effect ► Self-Insured Large Group Market: ► Relatively little known about this TPA market (remarkably, given its size) ► Medicare Advantage: ► Heavy local concentration, number of insurers lowers bids; compare/contrast to Part D ► Medicaid Managed Care Organizations (MCOs) ► Relatively little known (again, remarkably, given its size); often unobservable bidding