For decades, Americans have relied on competition in the insurance market to help make healthcare affordable. But in most of the country, competition hardly exists anymore.
That's a primary reason health premiums are growing nearly three times faster than wages, even as patients spend less time with their doctors and face routine delays and denials. In nearly three-quarters of commercial insurance markets, consumers lack meaningful choices. In Medicare Advantage, roughly nine in 10 enrollees live in highly concentrated markets.
Americans are rightly frustrated about paying nearly $30,000 in premiums for family coverage that squeezes patients at almost every turn. Roughly 70 percent support using antitrust enforcement to break up large health insurance companies. And by a 20-1 margin, voters want to block insurers from buying healthcare providers.
Yet while antitrust powers are an important tool — and should be used — they won't restore insurance market competition on their own. To fix our problems, policymakers will also need to unwind the policies that fueled consolidation in the first place.
A few large insurers increasingly control not only health plans but the entire patient care journey — from doctors and pharmacy benefit managers to clinics and hospitals. That has reduced their incentive to improve outcomes and compete on care quality. Instead, every prescription, treatment decision, and coverage policy now presents an opportunity to expand profits.
Take pharmacy benefit managers (PBMs), the intermediaries that determine which drugs patients receive. Today, just three PBMs, each affiliated with a major insurer, process roughly 80 percent of all U.S. prescription drug claims.
Insurers argue that PBMs exist to lower costs, but since PBM reimbursement is tied to drug costs, they make more by steering patients toward higher-priced drugs. One House Oversight Committee report found over 1,000 cases in which PBMs used their gatekeeping power to steer patients toward needlessly expensive drugs.
Insurers are rapidly buying up the rest of the care pipeline, too. UnitedHealth now employs or contracts with roughly one in 10 American physicians. Aetna merged in 2018 with CVS, which operates roughly 9,000 retail pharmacies. Together, these two firms alone capture a quarter of the U.S. commercial insurance market and roughly 40 percent of the Medicare Advantage market.
This consolidation is no accident. Policies such as the Affordable Care Act and the Inflation Reduction Act have distorted the market and empowered the largest insurers over their smaller competitors.
Obamacare imposed strict limits on how insurers could structure their coverage. That has made it harder for smaller insurers to compete through lower-priced, flexible alternatives while strengthening the position of larger incumbents.
Obamacare also tied federal subsidies to rising premiums, inflating insurer revenues while weakening incentives to hold costs down. Even as consolidation has risen, Democrats have continued pushing to extend subsidies that enrich large insurers rather than sending those dollars to patients.
The ACA's Medical Loss Ratio rule has also backfired. The rule requires insurers to spend a certain share of revenue on medical care, but vertically integrated insurers can technically satisfy it by paying subsidiary providers. That has encouraged insurers to buy PBMs, pharmacies, doctors, imaging centers, and clinics to remain compliant with the rule while increasing their profits.
And other federal programs have created similar distortions. Weak oversight of the 340B Drug Pricing Program, which gives safety-net providers access to discounted drugs, has enabled some hospitals and insurers to profit by pocketing drug discounts rather than passing savings on to patients.
Policymakers can help by making greater use of antitrust tools like the Sherman and Clayton Acts. In 2024, the Justice Department sued under the Clayton Act to stop UnitedHealth's acquisition of home health giant Amedisys, leading the companies to hand many of their operations over to rivals. Enforcers are also investigating UnitedHealth's broader conduct. They should press forward in applying the same scrutiny to other dominant insurers.
But policymakers cannot stop there. To prevent consolidation from recurring, Congress must also address the root causes of insurance monopolies. It should give money to patients instead of insurers and make companies compete for customers.
Congress should also curb wasteful ACA subsidies, revise the Medical Loss Ratio rule, strengthen oversight of federal programs such as 340B, and reform Medicare reimbursement rules that pay hospital-affiliated providers more than independent ones for providing the same care. All of these policies drive consolidation, which drives up prices and premiums.
For too long, Washington has rewarded insurers for getting bigger, rather than incentivizing them to put patients' needs first.
Patients deserve a healthcare market in which insurers compete for their business — not one in which a handful of companies own every step of a patient's care. By pairing antitrust enforcement with targeted legislative reforms, policymakers can help restore the choice and competition our insurance market needs.
Joel White is the president of the Council for Affordable Health Coverage, a nonprofit advocacy organization that seeks to lower the cost of healthcare for all Americans.