UAlbany Economists Report Common Ownership Problem in Medicare

Using the 13F-HR filings from the Securities and Exchange Commission (SEC) database and the number of outstanding shares for each insurer from the Center for Research in Securities Prices (CRSP), the authors discovered that the average shareholding of the five largest institutional investors in each of the major insurers increased by 7% on average, from 24.62% to 31.63% between 2013 and 2020. The network of common owners also became more interconnected. In 2013, four out of ten possible pairs of the five major insurers had two common investors holding over 5% of shares. By 2020, all ten pairs had multiple common investors, with three pairs having five common investors holding over 5%. 

The study finds that common ownership across the 34 PDP regions increases with how the reliance of regions on publicly traded insurers offering PDPs. For instance, in 2020, 75% of PDPs in North Carolina were offered by publicly traded insurers, compared to 84% in the Central New England market (Connecticut, Massachusetts, Rhode Island, and Vermont). The data also shows that the top five institutional investors had higher stockholdings in major PDP insurers in the Central New England market (28%) compared to North Carolina (25%). Higher institutional shareholding was linked to fewer available PDPs, higher premiums relative to income, and higher star ratings for stand-alone PDPs. These findings, along with the trend of growing common ownership, have significant implications for antitrust policy and patient care, raising policy questions about the effects on plan offerings, premiums, and quality for consumers’ welfare. 

The study, “Trends in Common Ownership among Insurers in Medicare Part D”, is forthcoming on Medical Care. Pinka Chatterji is a Professor of Economics at University at Albany. Chun-Yu Ho is an Associate Professor of Economics at University at Albany. Alyssa Kamara graduated from University at Albany with BA in Economics and BS in Public Health. Jaehak Lee is a Ph.D. student of Economics at University at Albany.