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The Elasticity of Demand for Health Maintenance Organizations

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  • W. P. Welch
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    Abstract

    This paper analyzes a national sample of firms where employees faced a choice between a Health Maintenance Organization (HMO) and a conventional insurer such as Blue Cross. A regression analysis is specified as a partial adjustment model and a logit functional form. The long-run price elasticity of demand for HMOs is estimated to be -0.6. To the extent that employers pass on increases in the total premium, the price elasticities facing insurers are higher. Furthermore, the demand for HMOs is a negative function of the copayment charged by the HMO for an office visit.

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    Bibliographic Info

    Article provided by University of Wisconsin Press in its journal Journal of Human Resources.

    Volume (Year): 21 (1986)
    Issue (Month): 2 ()
    Pages: 252-266

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    Handle: RePEc:uwp:jhriss:v:21:y:1986:i:2:p:252-266

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    Web page: http://jhr.uwpress.org/

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    Cited by:
    1. Goldman, Dana & Leibowitz, Arleen & Robalino, David, 2004. "Employee Responses to Health Insurance Premium Increases," MPRA Paper 12004, University Library of Munich, Germany.
    2. David M. Cutler & Sarah J. Reber, 1998. "Paying For Health Insurance: The Trade-Off Between Competition And Adverse Selection," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(2), pages 433-466, May.
    3. Bokhari, Farasat A.S., 2009. "Managed care competition and the adoption of hospital technology: The case of cardiac catheterization," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 27(2), pages 223-237, March.
    4. Beaulieu, Nancy Dean, 2002. "Quality information and consumer health plan choices," Journal of Health Economics, Elsevier, Elsevier, vol. 21(1), pages 43-63, January.
    5. Wedig, Gerard J. & Tai-Seale, Ming, 2002. "The effect of report cards on consumer choice in the health insurance market," Journal of Health Economics, Elsevier, Elsevier, vol. 21(6), pages 1031-1048, November.

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