Higher Market Share Helps Payers in Negotiations, Premium Impact Unclear

Payers with larger market shares tend to have lower prices nationally, a study published in Health Affairs confirmed.

The researchers used data from Turquoise Health, a company that collects hospital price data from the hospitals’ websites, to determine the impact that payer market share can have on prices. The study covered prices for 14 potentially shoppable services with data from 1,446 acute care hospitals. The data was collected through the end of 2021.

Prices were stable within hospitals but not across different payers. And the pricing was dependent, at least in part, on the payers’ market shares.

For a payer with a more dominant market position (71 percent market share or more), the 14 common services that the researchers observed were 14.7 percent cheaper, on average, than the prices for insurers in competitive areas. This difference was amplified when the hospital was a for-profit hospital, with high market share payers paying 32 percent less at these facilities than payers in more competitive markets.

In regions with payers that had medium-range market shares, the results were less dramatic than in areas with one payer that took up most of the market share. Nevertheless, these medium-range payers still paid less than payers with low market share by 7 percent.

Although the results decisively indicated that prices were lower for payers with higher market shares, at least two questions remained unanswered at the end of the study. First, certain regulations and market factors made it unclear whether the price decreases resulted in premiums reductions.

“A critical question for policymakers and consumers is whether savings obtained from lower prices are passed on in the form of lower premiums,” the researchers found. “The relationship to premiums is theoretically ambiguous. It is possible that insurers simply retain the savings in the form of higher profits.”

Second, it was difficult to contextualize the significance of the price decline. It is hard to compare price differences since there is a strong triumvirate of payers holding the highest market share. The top five health insurers with the highest market shares nationally in 2021 were the only insurance companies to exceed 10 percent of the market share.

Additionally, price transparency could reshape pricing as well. The impact of those regulations is still unclear.

“The insurer hospital dynamics should not minimize the potential role of consumers in using price transparency data to inform their decisions,” the researchers explained.

“Although in their current form the data are far from user-friendly, future innovators may find ways to package and present price information in a useful, actionable way for patients, which could influence their choices regarding care. It remains to be seen whether price transparency will unleash a true, consumer-driven revolution in healthcare.”

Just as payers can use their market share to negotiate lower prices, the Congressional Budget Office (CBO) found that providers with higher market shares can use their market position to get higher reimbursement out of payers. Hospital consolidation was a key factor in price increases, the CBO report found.

Health insurance consolidation has also increased in the past decade. However, this has not disrupted the market positions of the insurers with the highest market shares.