Insurers Can Reduce Provider Prices in Highly Concentrated Provider Markets

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There was no evidence that high insurer concentration reduced visit prices for primary care physicians or orthopedists.
There was no evidence that high insurer concentration reduced visit prices for primary care physicians or orthopedists.

Insurers have the bargaining power to reduce provider prices in highly concentrated provider markets, according to a report published in Health Affairs.

Richard M. Scheffler, PhD, and Daniel R. Arnold, from the University of California at Berkeley, analyzed how provider and insurer market concentration -- as measured by the Herfindahl-Hirschman Index (HHI) --interact and are correlated with prices.

The researchers found that insurers have the bargaining power to reduce provider prices in highly concentrated provider markets (HHI > 2,000). Specifically, in highly concentrated markets, hospital admission prices were 5% lower, and cardiologist, radiologist, and hematologist/oncologist visit prices were 4%, 7%, and 19% lower, compared to markets with HHI < 2,000.

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There was no evidence that high insurer concentration reduced visit prices for primary care physicians or orthopedists.

"The policy dilemma that arises from our findings is that there are no insurer market mechanisms that will pass a portion of these price reductions on to consumers in the form of lower premiums," the authors write.

Reference

Scheffler RM, Arnold DR. Insurer market powers lowers prices in numerous concentrated provider markets. Health Aff (Millwood). 2017; 36(9): 1539-1546.

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