HOW HEALTH-INSURANCE CONSOLIDATION HURTS PATIENTS, PHYSICIANS

The following information was released by the American Medical Association (AMA):

Learn how physicians can respond to arguments downplaying the harms of health-insurance consolidation.

By

Tanya Albert Henry Contributing News Writer

Jan 21, 2026

When powerful insurers dominate a given market, it's more difficult for independent physician practices to be competitive, leaving patients with fewer choices for care and leaving doctors with less choice in practice settings.

For example, when a large health insurer dominates a market, it usually means that:

Customers pay more for their premiums than they should have to.

Physician payments are depressed to rates below competitive levels.

Insurers don't have to compete on administrative efficiency or transparency.

Competition in physician and other health-professional markets is hurt because the dominance compels physician employment, aggravated by physician-noncompete agreements.

The door is opened to private equity as the only means to retain independence.

Yet year after year, studies show just how consolidated health insurance markets are, with last year being no exception.

For the newest edition of "Competition in Health Insurance: A Comprehensive Study of U.S. Markets"(PDF), the AMA's researchers analyzed 2024 data across 384 metropolitan areas, all 50 states, and the District of Columbia. They found that the vast majority of health insurance markets are highly concentrated and that insurers hold an outsized market share in them, which indicates low market competition. These findings are concerning because consumers have fewer choices and face higher premiums when markets are not competitive.

Meanwhile, the AMA's 2024 Physician Practice Benchmark Survey shows that 70.8% of physicians in practices that had been acquired by a hospital, private equity firm, or insurer in the last 10 years said being able to better negotiate higher payment rates with payers was an important reason that private practices were sold.

To combat health-insurance market consolidation, there is a real need to enact state legislation to protect physician practices, their patients and competition in the health care market, said Wes Cleveland, an AMA senior attorney.

He recently took time to discuss how health-insurance market consolidation can be harmful to patients and physicians, and he offered suggestions on how to respond to some arguments that payers make when they oppose state lawmakers' efforts to reform the health insurance industry.

His suggestions are based on arguments that were made in U.S. Department of Justice (DOJ) settlements and lawsuits, along with arguments made in other court proceedings across the country.

Lower payments result

Powerful insurers can have the ability to depress physician payments below competitive rates, hurting patients and physician practices.

Cleveland explained that payments below competitive levels can result in physicians being:

Unable to invest in technology and staff needed to participate effectively in federal, state or commercial value-based purchasing arrangements.

Unable to hire staff at competitive rates.

Unable to invest in other types of technology.

Forced to cut back on time spent with patients to save costs.

Less able to keep their private practices independent, leading to greater physician employment or pursuing capital from a third-party.

The DOJand a number of state attorneys general have filed lawsuits over the past quarter-century making similar arguments.

No case has been decided on these issues, specifically, because they were decided on other grounds. Nonetheless, the cases "contain very useful discussions of these issues and justifications for proposed mergers that have not been accepted by courts," Cleveland said.

For example, when Anthem and Cigna proposed merging in 2015, it was argued that the proposed merger was justified by claiming thatCigna created innovative population health payment models that Anthem didn't have. Physicians and other health professionals, it was argued, get extra payments to participate in these models; consequently, big savings were to come from transferring Anthem's discounts to providers participating in the payment models.

The U.S. Court of Appeals for the D.C. Circuitblocked the merger, refusing to accept the $2.4 billion transfer of discounts as sufficient justification for the proposed merger.

Going "elsewhere" difficult

Insurers may also argue that if physicians don't like payment rates, they can leave and contract with another payer for better rates. But the AMA, DOJ and state attorneys general lawsuits have laid out why this may not be possible.

For example, a significant share of a physician's revenue may come from an insurer. As the DOJ states in one case, "the difficulty [of contracting elsewhere] is even greater where the insurer accounts for a large share of all physicians' business in a given locality because of the effect on referrals from other physicians."

And the argument that physicians can switch to only seeing Medicare and Medicaid patients has fallen flat, too. A wealth of data shows thatMedicare underpays physicians (PDF), with physician payment declining 33% between 2001 and 2025 when adjusted for inflation.

On top of that, it is difficult for physicians to switch health insurers because it affects their patients and disrupts their practice, Cleveland said.

Meanwhile, on the health-care delivery side,one studyfound that private equity acquisitions in health care increased sixfold over a decade, with 484 deals in 2021, up from 75 in 2012. Corporations affiliated with major health insurers are acquiring physician practices at high rates too.

Research suggests that private equity ownership is associated withmixed to harmful impacts on the quality of care, increased health care costs, and in some cases can result inworse health outcomesin certain health care settings.