Are Health Insurance Markets Competitive?
Although the vast majority of Americans have private health insurance, researchers focus almost exclusively on public provision. Data on the private insurance sector is extremely difficult to obtain because health insurance contracts are complex, renegotiated annually, and not subject to reporting requirements. This study makes use of a privately-gathered national database of insurance contracts agreed upon by a sample of large, multisite employers between 1998 and 2005. To gauge the competitiveness of the group health insurance industry, I investigate whether health insurers charge higher premiums, ceteris paribus, to more profitable firms. I find they do, and this result is not driven by cross-sectional differences across firms or plans: firms with positive profit shocks subsequently face higher premium growth, even for the same healthplans. Moreover, this relationship is strongest in geographic markets served by a small number of insurance carriers. Further analysis suggests profits act to increase employers' switching costs, and insurers exploit this inelasticity where they have sufficient bargaining power. Given the rapid industry consolidation during the study period, these findings suggest healthcare insurers possess and exercise market power in an increasing number of geographic markets.
|Date of creation:||Dec 2008|
|Date of revision:|
|Publication status:||published as Dafny, Leemore S. 2010. "Are Health Insurance Markets Competitive?" American Economic Review, 100(4): 1399-1431. DOI: 10.1257/aer.100.4.1399|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bresnahan, T.F & Reiss, P.C., 1989.
"Entry And Competition In Concentrated Markets,"
151, Stanford - Studies in Industry Economics.
- David Dranove & Anne Gron & Michael J. Mazzeo, 2003. "Differentiation and Competition in HMO Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 51(4), pages 433-454, December.
- David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1996.
"Wages, Profits, and Rent-Sharing,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 111(1), pages 227-251.
- Armstrong, Mark, 2006. "Price discrimination," MPRA Paper 4693, University Library of Munich, Germany.
- Mark Duggan & Fiona Scott Morton, 2010.
"The Effect of Medicare Part D on Pharmaceutical Prices and Utilization,"
American Economic Review,
American Economic Association, vol. 100(1), pages 590-607, March.
- Mark Duggan & Fiona Scott Morton, 2008. "The Effect of Medicare Part D on Pharmaceutical Prices and Utilization," NBER Working Papers 13917, National Bureau of Economic Research, Inc.
- Borenstein, Severin & Farrell, Joseph, 2006.
"Do Investors Forecast Fat Firms? Evidence from the Gold Mining Industry,"
Competition Policy Center, Working Paper Series
qt4h02v1jp, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Severin Borenstein & Joseph Farrell, 2007. "Do investors forecast fat firms? Evidence from the gold-mining industry," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 626-647, 09.
- Severin Borenstein & Joseph Farrell, 1999. "Do Investors Forecast Fat Firms? Evidence from the Gold Mining Industry," NBER Working Papers 7075, National Bureau of Economic Research, Inc.
- Katherine Ho, 2009.
"Insurer-Provider Networks in the Medical Care Market,"
American Economic Review,
American Economic Association, vol. 99(1), pages 393-430, March.
- Katherine Ho, 2005. "Insurer-Provider Networks in the Medical Care Market," NBER Working Papers 11822, National Bureau of Economic Research, Inc.
- Duggan, Mark, 2004.
"Does contracting out increase the efficiency of government programs? Evidence from Medicaid HMOs,"
Journal of Public Economics,
Elsevier, vol. 88(12), pages 2549-2572, December.
- Mark Duggan, 2002. "Does Contracting Out Increase the Efficiency of Government Programs? Evidence from Medicaid HMOs," NBER Working Papers 9091, National Bureau of Economic Research, Inc.
- William T. Dickens & Lawrence F. Katz, 1987. "Inter-Industry Wage Differences and Theories of Wage Determination," NBER Working Papers 2271, National Bureau of Economic Research, Inc.
- Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier.
- Baltagi, Badi H. & Wu, Ping X., 1999. "Unequally Spaced Panel Data Regressions With Ar(1) Disturbances," Econometric Theory, Cambridge University Press, vol. 15(06), pages 814-823, December.
- Spulber, Daniel F., 1979. "Non-cooperative equilibrium with price discriminating firms," Economics Letters, Elsevier, vol. 4(3), pages 221-227.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:14572. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.