The effect of physician and health plan market concentration on prices in commercial health insurance markets

John E. Schneider, Pengxiang Li, Donald G. Klepser, N. Andrew Peterson, Timothy T. Brown, Richard M. Scheffler

Research output: Contribution to journalArticlepeer-review

35 Scopus citations


The objective of this paper is to describe the market structure of health plans (HPs) and physician organizations (POs) in California, a state with high levels of managed care penetration and selective contracting. First we calculate Herfindahl-Hirschman (HHI) concentration indices for HPs and POs in 42 California counties. We then estimate a multivariable regression model to examine the relationship between concentration measures and the prices paid by HPs to POs. Price data is from Medstat MarketScan databases. The findings show that any California counties exhibit what the Department of Justice would consider high HHI concentration measures, in excess of 1,800. More than three quarters of California counties exhibit HP concentration indices over 1,800, and 83% of counties have PO concentration levels in excess of 1,800. Half of the study counties exhibited PO concentration levels in excess of 3,600, compared to only 24% for plans. Multivariate price models suggest that PO concentration is associated with higher physician prices (p ≥ 0.05), whereas HP concentration does not appear to be significantly associated with higher outpatient commercial payer prices.

Original languageEnglish (US)
Pages (from-to)13-26
Number of pages14
JournalInternational Journal of Health Care Finance and Economics
Issue number1
StatePublished - Mar 2008

ASJC Scopus subject areas

  • Health(social science)
  • Finance
  • Economics, Econometrics and Finance(all)


  • Bargaining
  • Health insurance
  • Health insurers
  • Health plans
  • Marke concentration
  • Market structure
  • Physician organizations
  • Price


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