Health care experts warn that insurance costs will likely rise again in 2025.
One trend that could be contributing to rising insurance costs is the increasing concentration of the market among a fewer number of insurance companies.
We recently examined the evolution of market concentration in private health insurance. We also compared the costs of two types of private health plans: employer-sponsored plans and individual plans offered on the Healthcare.gov marketplace.
Today’s WatchBlog article examines what we discovered and reported in two new reports on these trends.
Private insurance is becoming more and more concentrated, which could increase the prices of health coverage
Over the past decade, the number of private health insurance companies in each state has declined. And in many states, only a few companies can insure most privately insured people. Market concentration is worrying. As markets become more concentrated, they may also become less competitive. This can lead to higher premiums, reduced access to affordable health insurance and fewer options for consumers.
We consider a state’s market to be concentrated when three or fewer insurance companies hold at least 80% of the underwriting market share. This concentration has been observed in many states for years.
In our November reportwe examined whether concentration trends were true across different private insurance markets: the individual market and the small and large employer markets. We found that all three markets have become more concentrated.
States and DC where the 3 largest insurance companies had at least 80% of enrollment, 2011-2022
Individual market. People without employer-sponsored health coverage can obtain coverage in the individual market, including through individual exchanges using Healthcare.gov. In 2022, most people (about 13.5 million) who obtained their health coverage on the individual market did so through individual exchanges.
When we looked at all states, we found that the individual market became more concentrated between 2011 and 2022. At its peak in 2019, 47 states were concentrated. However, since then, registrations have become less concentrated, with the number decreasing to 35 states in 2022.
Small employer market. More than 11 million people signed up for insurance plans in 2022 thanks to small employer group health insurance. This market also became more concentrated between 2011 and 2022, with 47 states having concentrated markets in 2022. The rate of concentration has slowed more recently.
Market for large employer groups. The large employer group market is also the largest of the three market types, with more than 40 million people enrolled in insurance plans in 2022. Over the years, this market has remained concentrated with only slight increases, from 40 states in 2011 to 43 states in 2022.
Why are markets so concentrated? Increased market concentration is often the result of consolidations – mergers and acquisitions – among existing insurance companies. However, concentration may also increase if existing health insurance companies exit the market, thereby reducing the number of issuers from which consumers can purchase coverage. And high concentration can make it difficult for new issuers to enter a market. Perpetuate the problem.
Our interactive map allows you to compare market concentration across states. Click on the graphic below (and linked here) to check it.
How do employer-sponsored plan costs compare to Healthcare.gov?
Private health coverage is the most common source of health coverage in the United States. And according to national estimates, spending on private health coverage could exceed $1.5 trillion this year. These costs are increasing and can have a significant impact on Americans.
About 165 million Americans receive health coverage through employer-sponsored plans. Under these plans, an employer and employees typically share the cost of purchasing coverage, called a premium.
Those without employer-sponsored plans can obtain coverage through the individual market, such as Healthcare.gov Marketplaces plans. As previously reported, in 2022, 13.5 million people signed up for Marketplace plans, under which the federal government and the policyholder typically share the cost of the premium.
In a new reportWe compared premiums for employer-sponsored plans with those for individual gold, silver and bronze plans purchased on the Marketplace. We found that employer-sponsored plans had, on average, lower estimated premiums per covered person than Marketplace plans. But employer-sponsored plans also required higher estimated contributions from covered individuals. Specifically, when we looked at the 33 states included in our review, we found:
- Monthly premiums per person were on average $54 lower under employer-sponsored plans.
- Monthly contributions per person were on average $41 higher for employer-sponsored plans.
Comparison of per capita premiums and enrollee contributions in 33 states, 2022
This comparison is complicated by differences between employer-sponsored and Marketplace plans, particularly in covered populations, plan design, and tax treatment.
We further describe the differences between these two types of private health plans in our full report from November. You can also learn more about our work on health care costs by visiting our special issues page at federal health spending.
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