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Exclusive contracts in health insurance

Author

Listed:
  • Rahkovsky, Ilya

Abstract

Competition between insurance companies for employees of a firm often increases the prices and reduces the availability of high-quality health plans offered to employees. An insurance company can reduce competition by signing an exclusive contract, which guarantees that the company is the only insurance provider. The study assesses whether exclusive contracts can alleviate the negative consequences of competition. Using the nation-wide survey of employers, I find that exclusive insurers charged 39-42 less for a unit of insurance quality than non-exclusive insurers. Furthermore, I find that the pattern of insurance quality dispersion is consistent with the exclusive insurers offering more high quality plans.

Suggested Citation

  • Rahkovsky, Ilya, 2010. "Exclusive contracts in health insurance," MPRA Paper 27473, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:27473
    as

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    File URL: https://mpra.ub.uni-muenchen.de/27473/1/MPRA_paper_27473.pdf
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    References listed on IDEAS

    as
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    5. Liran Einav & Amy Finkelstein & Mark R. Cullen, 2008. "Estimating Welfare in Insurance Markets Using Variation in Prices," NBER Working Papers 14414, National Bureau of Economic Research, Inc.
    6. Buchmueller, Thomas C. & Feldstein, Paul J., 1997. "The effect of price on switching among health plans," Journal of Health Economics, Elsevier, vol. 16(2), pages 231-247, April.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Monopoly in health insurance is better
      by Economic Logician in Economic Logic on 2011-02-08 21:16:00

    More about this item

    Keywords

    health insurance; exclusive contract; subsidy; vertical restraint; signaling;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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