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Paying a Premium on Your Premium? Consolidation in the US Health Insurance Industry

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  • Leemore Dafny
  • Mark Duggan
  • Subramaniam Ramanarayanan

Abstract

We examine whether and to what extent consolidation in the US health insurance industry has contributed to higher employer-sponsored insurance premiums. We exploit the differential impact across local markets of a national merger of two insurers to identify the causal effect of concentration on premiums. Using data for large groups, we estimate premiums in average markets were approximately seven percentage points higher by 2007 due to increases in local concentration from 1998-2006. We also find evidence consolidation facilitates the exercise of monopsonistic power vis-a-vis physicians, leading to reductions in their absolute employment and earnings relative to other healthcare workers. (JEL G22, I13)

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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 1161-1185, April.
    • Handle: RePEc:aea:aecrev:v:102:y:2012:i:2:p:1161-85
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    More about this item

    JEL classification:

    • 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

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    1. Paying a Premium on Your Premium? Consolidation in the US Health Insurance Industry (AER 2012) in ReplicationWiki

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