Healing the Body, Harming the Wallet? Hospital Market Concentration and Private Insurance Premiums under the Affordable Care Act (ACA)

Abstract

Decades-long trends towards highly concentrated provider markets in healthcare have serious implications for the prices of healthcare services, one of the leading drivers of healthcare spending, and costs for consumers. This study examines the impact of provider consolidation on costs for consumers by analyzing the relationship between hospital market concentration and private insurance premiums in the Affordable Care Act’s (ACA) health insurance marketplaces. Herfindahl-Hirschman Indices of market concentration were computed for 51 hospital markets across the nation and those markets were matched with premium data taken from Healthcare.gov via the Kaiser Family Foundation’s annual analysis of premium changes. I used Ordinary Least Squares (OLS) regression to determine the relationship between hospital market concentration and private insurance premiums in the marketplaces, and I find a positive, significant relationship between market concentration and premiums. Such a finding suggests that premium payers who live in highly concentrated hospital markets may pay more for their health insurance in the ACA’s marketplaces than those who live elsewhere, and such premium increases are nontrivial. The significant relationship between provider consolidation and higher premiums presents an opportunity for intervention to help lower healthcare costs moving forward. Bearing this finding in mind, I present a policy recommendation for provider consolidation moving forward that combines price transparency, regulation of hospital market pricing and behavior, and anti-trust litigation.