Do Health Insurers Possess Market Power?

34 Pages Posted: 6 Jul 2011 Last revised: 28 Feb 2012

See all articles by Laurie Bates

Laurie Bates

Bryant University

James I. Hilliard

Temple University - Department of Risk, Insurance & Healthcare Management

Rexford E. Santerre

University of Connecticut - Department of Finance

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

Bates, Laurie and Hilliard, James I. and Santerre, Rexford E., Do Health Insurers Possess Market Power? (June 1, 2010). Available at SSRN: https://ssrn.com/abstract=1879652

Laurie Bates (Contact Author)

Bryant University ( email )

1150 Douglas Pike
Smithfield, RI 02917-1284
United States

James I. Hilliard

Temple University - Department of Risk, Insurance & Healthcare Management ( email )

1801 Liacouras Walk
Philadelphia, PA 19122
United States

Rexford E. Santerre

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

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