GAO Issues Report: Private Health Insurance – Markets Remained Concentrated Through 2020, With Increases in the Individual and Small Group Markets

WASHINGTON, Nov. 10 -- The Government Accountability Office has issued a report (GAO-23-105672) entitled "Private Health Insurance - Markets Remained Concentrated through 2020, with Increases in the Individual and Small Group Markets."

Here are excerpts of summaries associated with the report.

What GAO Found: "In November 2020, GAO reported that, from 2010 through 2018, enrollment in private health insurance plans was concentrated, meaning a small number of issuers of those plans enrolled most of the people in a given market. Specifically, GAO considered a market concentrated in a state if three or fewer issuers held at least 80 percent of that market. GAO examined the individual (coverage sold directly to individuals), small group (coverage offered by small employers), and large group (coverage offered by large employers) markets and found that this pattern continued in 2019 and 2020. Specifically:

* Each of the three markets in 2020 was concentrated in at least 42 states (including the District of Columbia).

* The individual and small group markets generally became more concentrated in recent years. The median market share of the top three issuers in each market increased by 12 and 10 percentage points, respectively, from 2011 through 2020. With these increases, their median market share was at least 97 percent in both markets in 2020.

GAO found similar patterns of high concentration across individual market exchanges. Exchanges, which are marketplaces where consumers can compare and select among insurance plans offered by participating issuers, were established by the Patient Protection and Affordable Care Act (PPACA). From 2015 through 2020, most states' exchanges were concentrated and became more concentrated over time. This was often because the number of issuers decreased or the existing issuers increased their market share within a state. In 2020, the exchanges were concentrated in all states.

GAO received technical comments on a draft of this report from the Department of Health and Human Services and incorporated them as appropriate."

Why GAO Did This Study: "Individuals have various options for obtaining private health insurance, including through the individual, small group, and large group markets. A concentrated health insurance market may indicate less issuer competition and could affect consumers' choice of issuers and the premiums they pay for coverage.

PPACA included a provision for GAO to periodically study health insurance market concentration. This report describes changes in the concentration of enrollment among issuers in the overall individual, small group, and large group health insurance markets and in the individual market exchanges.

GAO determined market share in each of the three overall markets using enrollment data from 2019 and 2020 that issuers are required to report to the Centers for Medicare & Medicaid Services (CMS). GAO determined market share in the individual market exchanges in 2018, 2019, and 2020 using enrollment data from CMS. For all analyses, GAO used the most recent data available at the time of its review."

The report was sent to Sen. Ron Wyden, D-Oregon, chairman, Sen. Mike Crapo, R-Idaho, ranking member of the Senate Finance Committee, Sen. Patty Murray, D-Washington, chairman, Sen. Richard Burr, R-North Carolina, ranking member of the Senate Health, Education, Labor and Pensions Committee, Rep. Robert C. Scott, D-Virginia, chairman, Rep. Virginia Foxx, R-North Carolina, Republican leader of the House Education and Labor Committee, Rep. Frank Pallone Jr., D-New Jersey, chairman, Rep. Cathy McMorris Rodgers, R-Washington, Republican leader of the House Energy and Commerce Committee, Rep. Richard E. Neal, D-Massachusetts, chairman, and Rep. Kevin Brady, R-Texas, Republican leader of the House Ways and Means Committee, on Nov. 7, 2022.

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November 7, 2022

To: Congressional Committees

Historically, the market for private health insurance in the United States has been highly concentrated, meaning a small number of issuers enrolled most of the people in a given market./1 In November 2020, we reported that, from 2010 to 2018, three types of insurance markets--the large group market (coverage offered by large employers), the small group market (coverage offered by small employers), and the individual market (consisting mainly of coverage sold directly to individual consumers who lack access to group coverage)--were highly concentrated./2 We found that the three largest issuers in each of these markets held at least 80 percent of the market in most states from 2010 through 2018./3 Within the individual market, we reported similar concentration patterns for those issuers participating in the individual insurance exchanges--marketplaces operated by either the state or federal government (known as federally facilitated exchanges) that were required to be established in each state by the Patient Protection and Affordable Care Act (PPACA)--starting in 2015./4 Highly concentrated insurance markets may indicate less competition and could affect consumers' choices of issuers and the premiums they pay.

PPACA included a provision for us to conduct a study on competition and concentration in health insurance markets./5 This report describes changes in the concentration of enrollment among issuers in each state's

1. individual health insurance market, including the individual market exchange;

2. small group health insurance market; and

3. large group health insurance market.

To describe changes in concentration in the three health insurance markets in each state, we analyzed Medical Loss Ratio data that PPACA requires issuers to report annually to the Department of Health and Human Services' (HHS) Centers for Medicare & Medicaid Services (CMS) for years 2019 and 2020. These were the most recent data available at the time of our analyses./6 We previously used this same data source to analyze concentration from 2011 through 2018. Where applicable, we present this information alongside our updated analyses in this report./7 Within the individual, small group, and large group markets in each of the 51 states, we determined the state-level market share for each issuer by calculating the ratio of the total number of covered lifeyears for each issuer in a state to the total number of covered life-years in that state./8

To analyze changes in concentration in the individual market exchanges, we obtained data from CMS for 2018, 2019, and 2020, the most recent data available at the time of our analyses./9 For states that used a federally facilitated exchange, CMS provided us with summary-level enrollment data from its data warehouse, the Multidimensional Insurance Data Analytics System, for 2019 and 2020./10 For states that operated their own exchange, CMS provided us with summary-level enrollment data from its PPACA Risk Adjustment Program for 2018, 2019, and 2020.

CMS told us its PPACA Risk Adjustment Program collects enrollee-level data submitted by issuers annually, which CMS can access at the insurance plan summary level. Where applicable, we present previously reported information on the exchanges alongside our updated analyses in this report./11

For each state's overall markets and exchange, we counted issuers as participating in a market if they had enrollment in that market. We did not count issuers as participating if they offered coverage in a market but did not have any enrollment. Because there can be multiple issuers within a market that share a single parent company, we aggregated such issuers to the parent company level. If there was no parent company, we analyzed the data by the individual issuers./12 We did this to more fully account for the portion of the market held by each parent company. We calculated the three-firm concentration ratio--the combined shares of covered life-years for the three largest issuers in that market--and the market share of the single largest issuer in that market. We considered states' overall markets or exchanges to be highly concentrated if three or fewer issuers held at least 80 percent of the market share. Finally, while states may have multiple local markets with differing concentrations of enrollees among health issuers, the data we used to measure concentration were generally limited to enrollment at the state level, with the exception of our individual exchange enrollment data--thus precluding our ability to measure concentration within local markets except for the individual market exchanges./13 For all other markets, we present state-wide issuer market share, although all issuers may not have participated across the entire state.

We analyzed enrollment data from all of our sources as they were reported by issuers to CMS. We did not otherwise independently verify the accuracy or completeness of the information with the issuers. We assessed the reliability of the data in several ways, including reviewing relevant data manuals and other documentation and performing electronic tests of the data to identify any outliers or anomalies. We determined that the data were sufficiently reliable for the purposes of our reporting objectives.

We conducted this performance audit from January 2022 through November 2022 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

See footnotes here: https://www.gao.gov/assets/gao-23-105672.pdf

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The text of the GAO report is available at https://www.gao.gov/products/gao-23-105672

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