Paying a Premium on Your Premium? Consolidation in the U.S. Health Insurance Industry
AbstractWe examine whether and to what extent consolidation in the U.S. health insurance industry is leading to higher employer-sponsored insurance premiums. We make use of a proprietary, panel dataset of employer-sponsored healthplans enrolling over 10 million Americans annually between 1998 and 2006 to explore the relationship between premium growth and changes in market concentration. We exploit the differential impact of a large national merger of two insurance firms across local markets to estimate the causal effect of concentration on market-level premiums. We estimate real premiums increased by approximately 7 percentage points (in a typical market) due to the rise in concentration during our study period. We also find evidence that consolidation facilitates the exercise of monopsonistic power vis a vis physicians, whose absolute employment and relative earnings decline in its wake.
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Date of creation: Oct 2009
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- Leemore Dafny & Mark Duggan & Subramaniam Ramanarayanan, 2012. "Paying a Premium on Your Premium? Consolidation in the US Health Insurance Industry," American Economic Review, American Economic Association, vol. 102(2), pages 1161-85, April.
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L4 - Industrial Organization - - Antitrust Issues and Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-31 (All new papers)
- NEP-COM-2009-10-31 (Industrial Competition)
- NEP-HEA-2009-10-31 (Health Economics)
- NEP-IAS-2009-10-31 (Insurance Economics)
- NEP-MIC-2009-10-31 (Microeconomics)
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