Trends in Common Ownership among Insurers in Medicare Part D.

Background: Recent studies document the rising prevalence of common ownership by institutional investors in specific industries. Those investors offer products, such as mutual and index funds, to trade securities on behalf of others and often own shares of multiple firms in the same industry to diversify portfolios. However, at present, few studies focus on common ownership trends in health care.

Objectives: This paper examines institutional investors' common ownership in the major insurers offering plans in the Medicare Part D stand-alone prescription drug plan (PDP) market between 2013 and 2020.

Research design: Using data from the Securities and Exchange Commission (SEC) database and the Center for Research in Securities Prices, we compute the percentages of outstanding shares of each insurer owned by institutional investors. Data visualization and network analysis are employed to assess the trends in common ownership among major insurers.

Results: We document a high prevalence of and substantial increase in shared institutional investors in the PDP market. From 2013 to 2020, the degree of common ownership increased by 7% on average, and the common ownership network became more connected. Common ownership also varies across the 34 PDP regions depending on their reliance on listed insurers, that are traded in the stock exchange, offering stand-alone PDPs.

Conclusions: High and rising common ownership in the Medicare Part D PDP market raises policy questions about potential effects on plan offerings, premiums, and quality for consumers.