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Applied Microeconomics/IO

Kate Ho, Columbia University
Friday, October 9, 2015
10:00-11:30 AM
R1220 Ross School of Business Map
Insurer Competition in Health Care Markets

Abstract
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 to 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.
Building: Ross School of Business
Event Type: Workshop / Seminar
Tags: Economics, seminar
Source: Happening @ Michigan from Applied Microeconomics/Industrial Organization, Department of Economics, Department of Economics Seminars