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Health Plan Conversions: Are They in the Public Interest?

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  • Nancy Dean Beaulieu
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    Recently, not-for-profit health plans have been converting to for-profit status and these conversions have frequently occurred as steps to facilitate merger or acquisition with a for-profit company. Some industry observers attribute these managed care market place trends to an industry shake out resulting from increased competition in the sector. At the same time, the perceived competitive pressures have led to questions about the long run viability of non-profit health plans. Furthermore, some industry and government leaders believe that some non-profits are already conducting themselves like for-profit health plans and question the state premium tax exemption ordinarily accorded to such plans. This paper develops a framework for evaluating health plan conversions and examines related health policy issues through the lens of a case study of the proposed conversion of the CareFirst Blue Cross Blue Shield Company. Analyses demonstrate that CareFirst wields substantial market power in some segments of its local market, that it is unlikely to realize cost savings through expanded economies of scale, and that quality of care appears to be lower in the plans typically acquiring converting health plans.

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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10127.

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    Date of creation: Dec 2003
    Publication status: published as Nancy Dean Beaulieu, 2004. "An Economic Analysis of Health Plan Conversions: Are They in the Public Interest?," NBER Chapters, in: Frontiers in Health Policy Research, Volume 7, pages 129-177 National Bureau of Economic Research, Inc.
    Handle: RePEc:nbr:nberwo:10127
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