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Does it Matter if Your Health Insurer is For-Profit? Effects of Ownership on Premiums, Insurance Coverage, and Medical Spending

  • Leemore Dafny
  • Subramaniam Ramanarayanan
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    The majority of private health insurance in the U.S. is administered or issued by for-profit insurers, but little is known about how for-profit status affects outcomes. We find that plausibly exogenous increases in local for-profit market share induced by conversions of Blue Cross and Blue Shield affiliates in 11 states (and 28 distinct geographic markets) had no significant impact on average premiums, uninsurance rates, or medical loss ratios. However, we do find significant increases in Medicaid enrollment and a reallocation of medical spending toward rivals of BCBS. Moreover, in markets where the converting BCBS affiliate had substantial market share, fully-insured premiums for employer plans increased significantly. The results suggest that the welfare effects of subsidies for new not-for-profit insurers, such as those in the Affordable Care Act, are likely to depend on entrants' eventual market share.

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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18286.

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    Date of creation: Jul 2012
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    Handle: RePEc:nbr:nberwo:18286
    Note: AG HC IO
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    1. Janet Currie & Jonathan Gruber, 1996. "Health Insurance Eligibility, Utilization of Medical Care, and Child Health," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 431-466.
    2. Adamache, Killard W. & Sloan, Frank A., 1983. "Competition between non-profit and for-profit health insurers," Journal of Health Economics, Elsevier, vol. 2(3), pages 225-243, December.
    3. Dafny Leemore & Dranove David & Limbrock Frank & Scott Morton Fiona, 2011. "Data Impediments to Empirical Work on Health Insurance Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(2), pages 1-24, January.
    4. Gruber, Jonathan & Simon, Kosali, 2008. "Crowd-out 10 years later: Have recent public insurance expansions crowded out private health insurance?," Journal of Health Economics, Elsevier, vol. 27(2), pages 201-217, March.
    5. Silverman, Elaine & Skinner, Jonathan, 2004. "Medicare upcoding and hospital ownership," Journal of Health Economics, Elsevier, vol. 23(2), pages 369-389, March.
    6. repec:mpr:mprres:3164 is not listed on IDEAS
    7. repec:mpr:mprres:3165 is not listed on IDEAS
    8. Leemore S. Dafny, 2010. "Are Health Insurance Markets Competitive?," American Economic Review, American Economic Association, vol. 100(4), pages 1399-1431, September.
    9. Robert Town & Roger Feldman & Douglas Wholey, 2004. "The Impact of Ownership Conversions on HMO Performance," International Journal of Health Care Finance and Economics, Springer, vol. 4(4), pages 327-342, December.
    10. Mark Duggan, 2002. "Hospital Market Structure and the Behavior of Not-For-Profit Hospitals," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 433-446, Autumn.
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