Are health insurance markets competitive?

Leemore S. Dafny

Research output: Contribution to journalArticlepeer-review

77 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)1399-1431
Number of pages33
JournalAmerican Economic Review
Volume100
Issue number4
DOIs
StatePublished - Sep 2010

ASJC Scopus subject areas

  • Economics and Econometrics

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