MANAGED CARE January 2003. ©MediMedia USA
The dominance of some health plans in many markets has placed physicians in an untenable bargaining position, the American Medical Association contends. The AMA is using a report that backs up that position in the hope of persuading the the U.S. Department of Justice to take a closer look at health plan mergers and acquisitions.
In doing so, the AMA uses the Herfendahl-Hirschman Index of Competition (HHI), which is a mathematically derived index of market concentration that is used by the DOJ in its evaluation of competition. The AMA uses the HHI in presenting its case that in "many parts of the country, health insurance markets are dominated by a few companies that have significant power over the marketplace."
Markets with an HHI greater than 1,200 are considered concentrated, and the DOJ may restrict some mergers and acquisitions in those markets.
Markets with an HHI greater than 1,800 are considered highly concentrated. The DOJ "will not usually approve mergers and acquisitions in highly concentrated markets if there is even a slight impact on the HHI."
The AMA contends that "those physicians whose practices depend most heavily on patients covered by a particular insurer are most exposed to the potential for unreasonable contract terms and anticompetitive reimbursement rates."
Highly concentrated markets and dominant insurers (combined HMO/PPO products)
SOURCE: "COMPETITION IN HEALTH INSURANCE: A COMPREHENSIVE STUDY OF U.S. MARKETS," AMERICAN MEDICAL ASSOCIATION, CHICAGO, 2002