HHI Index
The AMA study relied on the Herfindahl-Hirschman Index, which is also used by antitrust authorities reviewing deals. The HHI gauges the number of competitors and their market dominance. Markets that fall between 1,500 and 2,500 points are seen as moderately concentrated, while markets in which the HHI is above 2,500 points are considered highly concentrated.
Transactions that increase the HHI by more than 200 points in highly concentrated markets are presumed likely to enhance market power under merger guidelines issued by antitrust authorities.
Anthem’s $48 billion purchase of Cigna, which is based near Hartford in Bloomfield, Connecticut, would enhance market power of the combined firm in 85 metropolitan areas in 13 states, including California, New York, Ohio and Connecticut, according to the AMA study. In Anthem’s hometown of Indianapolis, for example, the change in HHI would be 2,417, while in Hartford, Connecticut, it would be 1,357. An analysis of statewide concentration shows the deal would increase market power in 10 states.
Different Deal
Aetna, based in Hartford, says its deal is different from Anthem’s because of Humana’s large presence in Medicare Advantage, the privately administered version of the government- insurance program for the elderly and disabled, which operates differently from the commercial health-care market.
That deal would increase market power in 15 metropolitan areas in 7 states, including Florida, Illinois and Texas, the AMA said. Among cities that would see the largest changes in HHI are Macon, Georgia; Springfield, Ohio; and Louisville, Kentucky, the study showed.
America’s Health Insurance Plans, which represents the health-insurance industry, criticized the AMA study, saying the group is "recycling misleading data" and blaming health-care providers for driving up costs for consumers.
"Families and employers in every state have multiple choices of both insurance plans and types of coverage," AHIP said.
Antitrust Laws