Paying a Premium on Your Premium? Consolidation in the US Health Insurance Industry

We examine whether and to what extent consolidation in the US health insurance industry has contributed to higher employer-sponsored insurance premiums. We exploit the differential impact across local markets of a national merger of two insurers to identify the causal effect of concentration on prem...

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Bibliographic Details
Published in:The American economic review Vol. 102; no. 2; pp. 1161 - 1185
Main Authors: Dafny, Leemore, Duggan, Mark, Ramanarayanan, Subramaniam
Format: Journal Article
Language:English
Published: United States American Economic Association 01.04.2012
American Economic Assoc
Subjects:
1998-2006
Acquisitions & mergers
Compensation
Consolidation
Earnings
Economic theory
Employee benefits
Employees
Employer provided health insurance
Employers
Employment
Estimates
Gesundheitswesen
Health care
Health care industry
Health care policy
Health insurance
Health services
Herfindahl Hirschman index
Insurance companies
Insurance industry
Insurance premiums
Insurance providers
Krankenversicherung
Large groups
Life insurance
Market shares
Markets
Medical personnel
Mergers
Nurses
Physicians
Premiums
Self insurance
Shorter Papers
Sozialversicherungsbeitrag
Studies
U.S.A
Unternehmen
Unternehmenskonzentration
USA
Versicherungsbeitrag
Versicherungsmarkt
ISSN:0002-8282, 1944-7981
Online Access:Get full text
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Summary:We examine whether and to what extent consolidation in the US health insurance industry has contributed to higher employer-sponsored insurance premiums. We exploit the differential impact across local markets of a national merger of two insurers to identify the causal effect of concentration on premiums. Using data for large groups, we estimate premiums in average markets were approximately seven percentage points higher by 2007 due to increases in local concentration from 1998–2006. We also find evidence consolidation facilitates the exercise of monopsonistic power vis-à-vis physicians, leading to reductions in their absolute employment and earnings relative to other healthcare workers. JEL: G22, I13
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ISSN:0002-8282
1944-7981
DOI:10.1257/aer.102.2.1161