The Anti-Competitive Effects of Common Institutional Ownership in Health Insurance Markets

Recent empirical studies have shown that ownership by large institutional investors of a partial stake in multiple publicly traded firms within an industry, may lead to anti-competitive behavior. This is because the common owner wants to maximize its portfolio’s return and not the return from any individual company. I empirically assess the effects of common ownership on health insurance premiums for plans listed on the Affordable Care Act (ACA) exchanges from 2014 to 2019. To identify the causal impact of common ownership, I use two empirical strategies; the Arellano-Bond model and Bartik-style instruments. These models show that a one standard deviation increase in common ownership leads to an 8% increase in monthly premiums charged for certain plans. This finding is robust to different model specifications and suggests that common ownership reduces competition in the health insurance exchanges and leads to higher prices for consumers