How Important is Price Variation between Health Insurers?

41 Pages Posted: 29 Oct 2018

See all articles by Stuart V. Craig

Stuart V. Craig

University of Pennsylvania - The Wharton School

Keith M. Marzilli Ericson

Boston University - Markets, Public Policy, and Law; National Bureau of Economic Research (NBER)

Amanda Starc

Kellogg School of Management, Northweste

Date Written: October 2018

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 hard 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.

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Suggested Citation

Craig, Stuart V. and Ericson, Keith M. Marzilli and Starc, Amanda, How Important is Price Variation between Health Insurers? (October 2018). NBER Working Paper No. w25190. Available at SSRN: https://ssrn.com/abstract=3274416

Stuart V. Craig (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Keith M. Marzilli Ericson

Boston University - Markets, Public Policy, and Law ( email )

Boston, MA
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Amanda Starc

Kellogg School of Management, Northweste ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
3303382067 (Phone)

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