Health insurance competition: The effect of group contracts
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.
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