Competition in Health Insurance Markets (WP-26-21)
Martin Gaynor and Amanda Starc
The United States relies primarily on private health insurance markets, yet these markets are highly concentrated and becoming more so over time. The authors document concentration across commercial, Medicare Advantage, and Medicaid markets. They then examine how asymmetric information—particularly adverse selection—interacts with market power to shape premiums, plan design, and consumer welfare. Empirical evidence confirms that insurer consolidation raises premiums. The authors discuss how antitrust enforcement, risk adjustment, regulation, and informational interventions shape competition and consumer welfare in these markets.