Do Health Insurers Possess Market Power?
34 Pages Posted: 6 Jul 2011 Last revised: 28 Feb 2012
Date Written: June 1, 2010
Abstract
During the 2009-2010 health care reform debates, many policy makers presumed that a lack of competition in the U.S health insurance industry has resulted in greater levels of uninsurance. However, such a presumption has no basis in current research. This study, with a panel data set of the 50 states and the District of Columbia over the years from 2001 to 2007, examines how health-insurer market concentration at the state level influences the percentage of the population with either individually-purchased or employer-sponsored private health insurance. Two-stage least squares estimates are derived using a lagged measure of health-insurer concentration as an instrument. Results suggest that health insurers exercise market power on the seller-side of the health insurance marketplace but the restriction of output is limited to the individually-purchased insurance market segment.
Keywords: health insurance, market power
JEL Classification: I11
Suggested Citation: Suggested Citation