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Health insurance competition: The effect of group contracts

Author

Listed:
  • Jan Boone

    () (CPB Netherlands Bureau for Economic Policy Analysis)

  • Rudy Douven

    () (CPB Netherlands Bureau for Economic Policy Analysis)

  • C. Droge
  • I. Mosca

Abstract

The strategic and welfare implications of group contracts for health insurance are not well understood. We estimate a model to determine which factors explain the price of group contracts. In countries like the US and the Netherlands health insurance is provided by private firms, which can offer both individual and group contracts. Using a Dutch data set of about 700 group health insurance contracts over the period 2007-2008, 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 a larger discount (if any) than other groups. A simple Hotelling model, however, does explain our empirical results.

Suggested Citation

  • Jan Boone & Rudy Douven & C. Droge & I. Mosca, 2010. "Health insurance competition: The effect of group contracts," CPB Discussion Paper 152, CPB Netherlands Bureau for Economic Policy Analysis.
  • Handle: RePEc:cpb:discus:152
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    References listed on IDEAS

    as
    1. 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, May.
    2. Rudy Douven & E. Schut, 2006. "Health plan pricing behaviour and managed competition," CPB Discussion Paper 61, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Roman Inderst & Tommaso M. Valletti, 2011. "Buyer Power And The ‘Waterbed Effect’," Journal of Industrial Economics, Wiley Blackwell, vol. 59(1), pages 1-20, March.
    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. 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.
    6. Evans, Robert G., 1987. "Public health insurance: the collective purchase of individual care," Health Policy, Elsevier, vol. 7(2), pages 115-134, April.
    7. 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 Economics and Management, Springer, vol. 8(4), pages 225-244, December.
    8. 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.
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    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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