Are Health Insurance Markets Competitive?

To gauge the competitiveness of the group health insurance industry, I investigate whether health insurers charge higher premiums, ceteris paribus, to more profitable firms. Such "direct price discrimination" is feasible only in imperfectly competitive settings. Using a proprietary nationa...

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Bibliographic Details
Published in:The American economic review Vol. 100; no. 4; pp. 1399 - 1431
Main Author: Dafny, Leemore S.
Format: Journal Article
Language:English
Published: United States American Economic Association 01.09.2010
American Economic Assoc
Subjects:
1998-2005
Companies
Competition
Competitiveness
Discrimination
Employer provided health insurance
Employers
Group health insurance
Group insurance
Health care
Health care industry
Health insurance
Health maintenance organizations
Health services
Insurance industry
Insurance markets
Insurance premiums
Insurance providers
Krankenversicherung
Market structure
Markets
Marktmacht
Premiums
Private Krankenversicherung
Profit planning
Profitability
Profitable firms
Self insurance
Studies
USA
Wettbewerb
United States > US
ISSN:0002-8282, 1944-7981
Online Access:Get full text
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Description
Summary:To gauge the competitiveness of the group health insurance industry, I investigate whether health insurers charge higher premiums, ceteris paribus, to more profitable firms. Such "direct price discrimination" is feasible only in imperfectly competitive settings. Using a proprietary national database of health plans offered by a sample of large, multisite firms from 1998–2005, I find firms with positive profit shocks subsequently face higher premium growth, even for the same health plans. Moreover, within a given firm, those sites located in concentrated insurance markets experience the greatest premium increases. The findings suggest health care insurers are exercising market power in an increasing number of geographic markets.
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ISSN:0002-8282
1944-7981
DOI:10.1257/aer.100.4.1399