Insurer Competition in Health Care Markets
We analyze the impact of insurer competition on health care markets using a model of premium setting, hospital-insurer bargaining, household demand for insurance, and individual demand for hospitals. Increased insurer competition may lead to lower premiums; it may also increase health providers' leverage to negotiate higher prices, thereby mitigating premium reductions. We use detailed California admissions, claims, and enrollment data from a large benefits manager. We estimate our model and simulate the removal of an insurer from consumers' choice sets. Although premiums rise and annual consumer surplus falls by $50-120 per capita, hospital prices and spending fall in certain markets as remaining insurers negotiate lower rates. Overall, the impact on negotiated prices is heterogeneous, with increases or decreases of up to 15% across markets. We conclude that insurer competition can increase consumer surplus but also generate a redistribution of rents across hospitals and greater medical spending in certain markets.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Sep 2013|
|Date of revision:|
|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
References listed on IDEAS
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.:
- Gal-Or, Esther, 1999. "The profitability of vertical mergers between hospitals and physician practices," Journal of Health Economics, Elsevier, vol. 18(5), pages 621-652, October.
- Robin S. Lee, 2013. "Vertical Integration and Exclusivity in Platform and Two-Sided Markets," American Economic Review, American Economic Association, vol. 103(7), pages 2960-3000, December.
- 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.
- Lars A. Stole & Jeffrey Zwiebel, 1996. "Intra-firm Bargaining under Non-binding Contracts," Review of Economic Studies, Oxford University Press, vol. 63(3), pages 375-410.
- Moriya, Asako S. & Vogt, William B. & Gaynor, Martin, 2010. "Hospital prices and market structure in the hospital and insurance industries," Health Economics, Policy and Law, Cambridge University Press, vol. 5(04), pages 459-479, October.
- Joseph Farrell & David Balan & Keith Brand & Brett Wendling, 2011. "Economics at the FTC: Hospital Mergers, Authorized Generic Drugs, and Consumer Credit Markets," Review of Industrial Organization, Springer, vol. 39(4), pages 271-296, December.
- Maria Polyakova, 2015. "Regulation of Insurance with Adverse Selection and Switching Costs: Evidence from Medicare Part D," NBER Working Papers 21541, National Bureau of Economic Research, Inc.
- Matthew Grennan, 2013. "Price Discrimination and Bargaining: Empirical Evidence from Medical Devices," American Economic Review, American Economic Association, vol. 103(1), pages 145-77, February.
- Michaela Draganska & Daniel Klapper & Sofia B. Villas-Boas, 2010.
"A Larger Slice or a Larger Pie? An Empirical Investigation of Bargaining Power in the Distribution Channel,"
INFORMS, vol. 29(1), pages 57-74, 01-02.
- Draganska, Michaela & Klapper, Daniel & Villas-Boas, Sofia B., 2008. "A Larger Slice or a Larger Pie? An Empirical Investigation of Bargaining Power in the Distribution Channel," Research Papers 2001, Stanford University, Graduate School of Business.
- Draganska, Michaela & Klapper, Daniel & Villas-Boas, Sofia B., 2008. "A larger slice or a larger pie? : an empirical investigation of bargaining power in the distribution channel," CUDARE Working Paper Series 1046, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
- Draganska, Michaela & Klapper, Daniel & Villas-Boas, Sofia B, 2008. "A Larger Slice or a Larger Pie? An Empirical Investigation of Bargaining Power in the Distribution Channel," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7v13q46w, Department of Agricultural & Resource Economics, UC Berkeley.
- Leemore Dafny & Kate Ho & Mauricio Varela, 2013.
"Let Them Have Choice: Gains from Shifting Away from Employer-Sponsored Health Insurance and toward an Individual Exchange,"
American Economic Journal: Economic Policy,
American Economic Association, vol. 5(1), pages 32-58, February.
- Leemore Dafny & Katherine Ho & Mauricio Varela, 2010. "Let them Have Choice: Gains from Shifting Away from Employer-Sponsored Health Insurance and Toward an Individual Exchange," NBER Working Papers 15687, National Bureau of Economic Research, Inc.
- Henrick Horn & Asher Wolinsky, 1988.
"Bilateral Monopolies and Incentives for Merger,"
RAND Journal of Economics,
The RAND Corporation, vol. 19(3), pages 408-419, Autumn.
- Kate Ho & Joy Ishii & Ariel Pakes & J. Porter, 2007.
"Moment inequalities and their application,"
CeMMAP working papers
CWP16/07, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- Matthew S. Lewis & Kevin E. Pflum, 2015. "Diagnosing Hospital System Bargaining Power in Managed Care Networks," American Economic Journal: Economic Policy, American Economic Association, vol. 7(1), pages 243-74, February.
- Gregory S. Crawford & Robin S. Lee & Michael D. Whinston & Ali Yurukoglu, 2015.
"The Welfare Effects of Vertical Integration in Multichannel Television Markets,"
NBER Working Papers
21832, National Bureau of Economic Research, Inc.
- Robin Lee & Michael Whinston & Ali Yurukoglu & Gregory Crawford, 2013. "The Welfare Effects of Vertical Integration in Multichannel Television Markets," 2013 Meeting Papers 81, Society for Economic Dynamics.
- Katherine Ho, 2005.
"The Welfare Effects of Restricted Hospital Choice in the US Medical Care Market,"
NBER Working Papers
11819, National Bureau of Economic Research, Inc.
- Katherine Ho, 2006. "The welfare effects of restricted hospital choice in the US medical care market," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(7), pages 1039-1079.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:19401. 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.