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Health insurance competition: the effect of group contracts

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  • Boone, Jan
  • Douven, Rudy
  • Droge, Carline
  • Mosca, Ilaria

Abstract

In countries like the US and the Netherlands health insurance is provided by private firms. These private firms can offer both individual and group contracts. The strategic and welfare implications of such group contracts are not well understood. Using a Dutch data set of about 700 group health insurance contracts over the period 2007-2008, we estimate a model to determine which factors explain the price of group contracts. We find that groups that are located close to an insurers' home turf pay a higher premium than other groups. This finding is not consistent with the bargaining argument in the literature as it implies that concentrated groups close to an insurer's home turf should get (if any) a larger discount than other groups. A simple Hotelling model, however, does explain our empirical results.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7871.

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Date of creation: Jun 2010
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Handle: RePEc:cpr:ceprdp:7871

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Keywords: health insurance; health-plan choice; managed competition;

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  1. Evans, Robert G., 1987. "Public health insurance: the collective purchase of individual care," Health Policy, Elsevier, vol. 7(2), pages 115-134, April.
  2. Jensen, Gail A & Morrisey, Michael A, 1990. "Group Health Insurance: A Hedonic Price Approach," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 38-44, February.
  3. Alan T. Sorensen, 2003. "Insurer-hospital bargaining: negotiated discounts in post-deregulation connecticut," Journal of Industrial Economics, Wiley Blackwell, vol. 51(4), pages 469-490, December.
  4. Brooks, John M. & Dor, Avi & Wong, Herbert S., 1997. "Hospital-insurer bargaining: An empirical investigation of appendectomy pricing," Journal of Health Economics, Elsevier, vol. 16(4), pages 417-434, August.
  5. Roman Inderst & Tommaso M. Valletti, 2008. "Buyer Power and the “Waterbed Effect”," CEIS Research Paper 107, Tor Vergata University, CEIS, revised 10 Jul 2008.
  6. Machiel Dijk & Marc Pomp & Rudy Douven & Trea Laske-Aldershof & Erik Schut & Willem Boer & Anne Boo, 2008. "Consumer price sensitivity in Dutch health insurance," International Journal of Health Care Finance and Economics, Springer, vol. 8(4), pages 225-244, December.
  7. Peter Zweifel & Harry Telser & Stephan Vaterlaus, 2006. "Consumer Resistance Against Regulation: The Case of Health Care," Journal of Regulatory Economics, Springer, vol. 29(3), pages 319-332, 05.
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