American Economic Review Vol. 102 No. 2 2012

Paying a Premium on Your Premium? Consolidation in the US Health Insurance Industry

Leemore Dafny¹; Mark Duggan²; Subramaniam Ramanarayanan³

¹ Kellogg School of Management, 2001 Sheridan Road, Evanston, IL 60208. · ² Wharton School, University of Pennsylvania , 3620 Locust Walk, Philadelphia, PA 19104 · ³ UCLA Anderson School of Management, 110 Westwood Plaza, Los Angeles, CA 90095.

Abstract

We examine whether and to what extent consolidation in the US health insurance industry has contributed to higher employer-sponsored insurance premiums. We exploit the differential impact across local markets of a national merger of two insurers to identify the causal effect of concentration on premiums. Using data for large groups, we estimate premiums in average markets were approximately seven percentage points higher by 2007 due to increases in local concentration from 1998–2006. We also find evidence consolidation facilitates the exercise of monopsonistic power vis-à-vis physicians, leading to reductions in their absolute employment and earnings relative to other healthcare workers. JEL: G22, I13

DOI

10.1257/aer.102.2.1161

Volume

102

Issue

2

Pages

1161-1185

Language

en

Sources

crossref openalex bibtex:phds-export.bib

Cite

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