EvaluatingtheImpactofHealthInsuranceIndustry.pdfVIP

Issue Brief The COMMONWEALTH FUNDNOVEMBER 2015 Evaluating the Impact of Health Insurance Industry Consolidation: Learning from Experience Leemore S. Dafny Abstract Research shows consolidation in the private health insurance industry leads to pre- mium increases, even though insurers with larger local market shares generally obtain lower prices from health care providers. Additional research is needed to understand how to protect against harms and unlock benefits from scale. Data on enrollment, premiums, and costs of com- mercial health insurance—by insurer, plan, customer segment, and local market—would help us understand whether, when, and for whom consolidation is harmful or beneficial. Such trans- parency is common where there is a strong public interest and substantial public regulation, both of which characterize this vital sector. INTRODUCTION The public interest in ensuring competitive, robust private health insurance markets has never been greater. Today, nearly two-thirds of the U.S. population under age 65 is enrolled in a private comprehensive health plan.1 Private insurance is also playing an increasingly important role in supplying coverage to Americans in public programs, including Medicaid, which has experienced a rapid increase in enrollment as a result of the Affordable Care Act (ACA). Those who lack coverage and are ineligible for public coverage must purchase private policies to comply with the ACA’s individual mandate. At the same time, private insurance premiums ($16,834 for the average fam- ily) and out-of-pocket spending ($800 per person) are high and projected to grow. Federal subsidies for individuals purchasing plans in the ACA’s insurance marketplaces, meanwhile, are projected to total $37 billion in 2015 and reach $87 billion by 2020.2,3 Given these stakes, there is a substantial public benefit to critically evaluating any significant changes in markets for private health insurance. This issue brief, based on my extens