Medicare Advantage plans suffer from lack of competition, AMA says

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The majority of Medicare Advantage markets are highly concentrated, and according to the American Medical Association, this can have a detrimental effect on both patients and doctors.

In the AMA’s annual report on the state of competition between health insurers, which looked at 380 metropolitan statistical areas (MSAs) in the U.S., the AMA said MSAs tend to be dominated by one or two insurers – and while Medicare Advantage markets have become less concentrated in recent years, they’re still high above the threshold for highly concentrated markets.

The decrease in average MA market concentration masks some merger activity that took place, the AMA said. Notable among these was Centene’s acquisition of WellCare. Although both insurers provided MA coverage in several states prior to the merger, with a few exceptions their market shares were small and there was not a lot of significant market overlap. So while the merger generally did not have large effects at the local level, it increased Centene’s share at the national level from 1% to 4% and moved it up the rankings from 10th to sixth between 2017 and 2021.

Mergers such as this don’t raise antitrust concerns in part due to a lack of significant market overlap, the AMA said. However, by acquiring an insurer in another market where they don’t already provide coverage, some insurers have been able to get bigger, such as the way Anthem did in commercial markets through its 2004 acquisition of WellPoint as well as each of those merging parties’ acquisition of other Blue insurers before that.

The findings, the AMA said,  should prompt federal and state antitrust authorities to vigorously examine the competitive effects of proposed mergers involving health insurers.

The AMA singled out consolidation as potentially troublesome, pointing to mergers it believes caused competitive harm. In particular it pointed to a 2008 merger between UnitedHealth and Sierra, which was allowed under the condition that UnitedHealth divest most of its Medicare Advantage business in the Las Vegas area. But premiums in the commercial health insurance markets in Nevada increased in the wake of the merger.

Some attempts to consolidate have received greater scrutiny in recent years.  In 2007, a merger proposed by Independence Blue Cross and Highmark was called off because the Pennsylvania Insurance Department insisted that one of them drop its Blue brand. The companies refused and instead called off the merger.

WHAT’S THE IMPACT

The report touted itself as the first to incorporate Medicare Advantage data. What the data showed is that 34% of MSA-level markets had one insurer with a share of 50% or more, while 6% of MSA-level markets had one insurer with a share of 70% or more.

The 10 states with the least competitive Medicare Advantage markets were, in descending order, Vermont, North Dakota, Wyoming, Montana, Rhode Island, South Dakota, West Virginia, Washington D.C., Nebraska, and Louisiana.

The 10 largest health insurers in the U.S. at the national level by market share were: UnitedHealth Group (28%); Humana (19%); CVS Health, owner of Aetna (11%); Kaiser Permanente (7%); 5. Elevance Health, formerly Anthem (6%); Centene (4%); Cigna (2%), Blue Cross Blue Shield of Michigan (2%); Highmark (1%); and SCAN Health Plan (1%).

The report also took a broader look at commercial markets. Forty-eight percent of MSA-level markets had one insurer with a share of 50% or more; 11% of MSA-level markets had one insurer with a share of 70% or more.

The 10 states with the least competitive commercial markets were Alabama, Michigan, Louisiana. Hawaii, South Carolina, Kentucky, Alaska, Illinois, Vermont and Delaware.

The 10 largest health insurers in the U.S. at the national level by market share were: UnitedHealth Group (15%); Elevance Health(12%); CVS Health (11%); Cigna (10%); Kaiser Permanente (7%); Health Care Service Corp. (BCBS) (6%); Blue Cross Blue Shield of Michigan (2%); Blue Cross Blue Shield of Florida  (2%); Blue Shield of California (2%); and Highmark (2%).

THE LARGER TREND

In October the AMA turned its eye towards pharmacy benefit managers (PBMs), which has also suffered from market consolidation, the group said.

Even though the largest health insurers and PBMs are vertically integrated, there is still a significant portion of the market that remains not vertically integrated, particularly at the local level, according to the report.

Meanwhile, the Centers for Medicare and Medicaid Services released its Medicare Advantage and Part D Star Ratings for 2023 in October. In all, 57 contracts earned five stars, down significantly from 74 last year. There were 67 contracts that earned 4.5 stars (down from 96 last year); 136 that earned four stars (compared to 152); 116 that earned 3.5 stars (compared to 122); and 90 that earned three stars, up from 25 last year.

Significantly, 37 plans earned 2.5 stars, compared to just two last year; at the same time, four plans earned two stars, compared to none last year. All four two-star plans are Wellcare by Centene Corporation.

One star represents poor performance, and five stars represents excellent performance.
 

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