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Employment‐Based Health Insurance and the Effectiveness of Intrafirm Competition between Insurance Providers

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  • W. David Bradford
  • Lee Rivers Mobley

Abstract

This paper examines the effects of competition between insurers for the patronage of a firm's employees. Since for employment‐based health insurance the employee choice of health insurance plans is often limited, the availability of competing plans in the market does not necessarily reflect competition within the firm. We utilize data from the 1987 National Medical Expenditures Survey (NMES) to examine the effect of intra firm competition in the employment‐based health insurance market. Using switching regression models, we explore the process that sets premiums and the process that sets the net premium/medical cost margins. We find that greater choice results in higher margins and lower premiums. We also find significantly negative health maintenance organization choice effects on both premiums and margins.

Suggested Citation

  • W. David Bradford & Lee Rivers Mobley, 2004. "Employment‐Based Health Insurance and the Effectiveness of Intrafirm Competition between Insurance Providers," Southern Economic Journal, John Wiley & Sons, vol. 70(4), pages 1012-1031, April.
    • Handle: RePEc:wly:soecon:v:70:y:2004:i:4:p:1012-1031
    DOI: 10.1002/j.2325-8012.2004.tb00617.x
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    References listed on IDEAS

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