Private Health Insurance: Research on Competition in the Insurance Industry

Health care providers and members of Congress have raised concerns that consolidation in the private health insurance industry may be resulting in less competitive markets and contributing to rising health insurance rates paid by consumers and employers. However, measuring the extent of changes in market competition over time or the effects of changes is challenging. In particular, reliable, longitudinal data to measure concentration, that is, the number of competitors and their relative market share, are only available on health maintenance organizations (HMO) but not on preferred provider organizations (PPO) or other insurance products that may comprise the market. Further, data on health insurers are not available at all geographic levels. Despite these challenges, researchers have used the data available to study competition in health insurance markets, typically using one of two measures of competition: (1) HMO market concentration or (2) the number of HMOs in a market. Researchers acknowledge that market concentration and the number of competitors are not perfect measures of competition in private health insurance markets and that there are limits to the conclusions to be drawn from studies that rely on the available data. This report summarizes the findings of peer-reviewed research on concentration in private health insurance markets and the relationship between the level of competition and other variables, such as premium prices and provider reimbursement rates.