Affiliation:
1. Northwestern University, Kellogg School of Management, Jacobs Center Suite 607, 2001 Sheridan Road, Evanston, IL 60201 and NBER.
Abstract
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. (JEL G22, I11, I18, L11, L25)
Publisher
American Economic Association
Subject
Economics and Econometrics
Cited by
103 articles.
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