Health plan pricing behaviour and managed competition
AbstractIn the Dutch social health insurance scheme, health plans operate in a managed competition framework. Essential features of this framework are risk adjustment, open enrolment and community rating. The objective is to study how health plans determine their community rated premiums. Using a panel data set for all health plans operating in the Dutch social health insurance market over the period 1996-2004, we estimate a premium model to determine which factors explain the price setting behaviour of health plans. Our empirical results indicate that competition did not play a major role in premium setting by health plans. We find that financial stability rather than profit maximisation offers the best explanation for health plan pricing behaviour. The forecast of next year's health-care expenditure by the government and the adjusted forecast by the insurers' association play a major role in health plans' pricing decisions. The introduction of a national health insurance scheme in 2006 urged all citizens to reconsider their health plan choice. The threat of losing customers had a profound impact on health plans' pricing behaviour. In sharp contrast to the period 1996-2005, in 2006 competition seems to play a dominant role in insurers' pricing decisions. Whether this will be a temporary or a lasting phenomenon is hard to predict.
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Bibliographic InfoPaper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 61.
Date of creation: Mar 2006
Date of revision:
Find related papers by JEL classification:
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-25 (All new papers)
- NEP-COM-2006-03-25 (Industrial Competition)
- NEP-HEA-2006-03-25 (Health Economics)
- NEP-IAS-2006-03-25 (Insurance Economics)
- NEP-MIC-2006-03-25 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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