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Health Care Provider Networks: Are Insurers Better Off?

Author

Listed:
  • Mougeot Michel
  • Naegelen Florence

    (CRESE, University of Bourgogne-Franche-Comte, Besancon, France)

Abstract

Certain health insurers offer a free choice of providers and an identical copayment regardless of the provider. Others build networks and use selective contracting and financial incentives to channel policyholders to contracted suppliers. In the case of unregulated prices, we compare these two policies when the off-network medical service is not covered. We show how policy ranking depends on the characteristics of demand. If demand is linear, a for-profit insurer and a not-for-profit insurer obtain a higher profit and utility under selective contracting than under uniform reimbursement. In the constant elasticity case, these results do not hold. Insurers prefer uniform reimbursement while consumers are better off under selective contracting in both cases.

Suggested Citation

  • Mougeot Michel & Naegelen Florence, 2021. "Health Care Provider Networks: Are Insurers Better Off?," Review of Network Economics, De Gruyter, vol. 20(4), pages 187-212, December.
    • Handle: RePEc:bpj:rneart:v:20:y:2021:i:4:p:187-212:n:3
    DOI: 10.1515/rne-2021-0038
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    Keywords

    selective contracting; providers network; product differentiation; health care demand elasticity; imperfect substitutability;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality

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