Geographic Market Definition in Commercial Health Insurer Matters: A Unified Approach for Merger Review, Monopolization Claims, and Monopsonization Claims
The Antitrust Bulletin, Volume 68, Issue 3, September 2023
In their paper published in The Antitrust Bulletin, academic affiliate Deborah Haas-Wilson, Managing Principal Brian Gorin, and Vice President Kristof Zetenyi provide an alternative methodology for defining markets that can be applied in merger reviews and antitrust investigations involving the purchase or sale of products having an intrinsic geographic component, such as (1) the sale of commercial health plans and (2) the purchase of health care providers’ services by commercial health plans.
The paper, titled “Geographic Market Definition in Commercial Health Insurer Matters: A Unified Approach for Merger Review, Monopolization Claims, and Monopsonization Claims,” examines the practice of aggregation based on the assumption of similar competitive conditions when the straightforward application of geographic market definition using the customer or supplier location results in markets that are unintuitively small. The authors show that narrow interpretation of the Horizontal Merger Guidelines that uses either the supplier or the customer location to geographically bind competition is not well-suited for defining relevant antitrust geographic markets when the services being sold or purchased have an intrinsic geographic component, such as access to a network in a specific geographic location. To illustrate how the US Department of Justice (DOJ) has grappled with the standard approach to geographic market definition in these matters, the authors dissect arguments presented in the DOJ’s complaints in its three challenges to mergers of health insurers – Anthem/Cigna (2016), UnitedHealth/PacifiCare (2005), and Aetna/Prudential (1999).
The authors then outline a framework that overcomes these shortcomings and leads to the definition of geographic markets that are intuitive and consistent with the view among economists and practitioners that health care markets are local. This approach resolves many of the challenges associated with defining these geographic markets, while remaining consistent with the Horizontal Merger Guidelines. The authors illustrate conceptually how this framework could be applied to the markets for the purchase of health care providers’ services by commercial health insurers and the sale of commercial health insurance.