Health Insurance Competition: The Effect of Group Contracts
CentER Discussion Paper No. 2010-55
24 Pages Posted: 3 Jun 2010 Last revised: 25 Nov 2010
Date Written: May 19, 2010
In countries like the US and the Netherlands health insurance is provided by private firms. These private firms can offer both individual and group contracts. The strategic and welfare implications of such group contracts are not well understood. Using a Dutch data set of about 700 group health insurance contracts over the period 2007-2008, we estimate a model to determine which factors explain the price of group contracts. We find that groups that are located close to an insurers’ home turf pay a higher premium than other groups. This finding is not consistent with the bargaining argument in the literature as it implies that concentrated groups close to an insurer’s home turf should get (if any) a larger discount than other groups. A simple Hotelling model, however, does explain our empirical results.
Keywords: health insurance, health-plan choice, managed competition
JEL Classification: I11, L13
Suggested Citation: Suggested Citation