Monopoly, monopsony, and market definition: An antitrust perspective on market concentration among health insurers

James Robinson uses the Herfindahl-Hirschman Index (HHI) to compute the concentration of commercial health insurance markets in most of the states during the past four years. The HHI is the analytical foundation for the federal antitrust merger guidelines, so we consider his findings from an antitrust perspective. Market concentration provides an important benchmark for antitrust analysis, but it does not, standing alone, indicate the presence of problematic (anticompetitive) behavior or a problem that antitrust law can solve. Even if it did, there are major problems in treating individual states as discrete insurance markets. Unless the market is correctly defined, any analysis of market concentration is thoroughly unreliable.