How important is price variation between health insurers?

Stuart V. Craig, Keith Marzilli Ericson*, Amanda Starc

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

Prices negotiated between payers and providers affect a health insurance contract's value via enrollees’ cost-sharing and self-insured employers’ costs. However, price variation across payers is difficult to observe. We measure negotiated prices for hospital-payer pairs in Massachusetts and characterize price variation. Between-payer price variation is similar in magnitude to between-hospital price variation. Administrative-services-only contracts, in which insurers do not bear risk, have higher prices. We model negotiation incentives and show that contractual form and demand responsiveness to negotiated prices are important determinants of negotiated prices.

Original languageEnglish (US)
Article number102423
JournalJournal of Health Economics
Volume77
DOIs
StatePublished - May 2021

Keywords

  • Contract
  • Insurance
  • Negotiated prices
  • Price variation
  • Self-insured employers

ASJC Scopus subject areas

  • Health Policy
  • Public Health, Environmental and Occupational Health

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