Exclusive contracts in health insurance

Rahkovsky, Ilya (2010): Exclusive contracts in health insurance.

Abstract

Competition between insurance companies for employees of a firm often increases the prices and reduces the availability of high-quality health plans offered to employees. An insurance company can reduce competition by signing an exclusive contract, which guarantees that the company is the only insurance provider. The study assesses whether exclusive contracts can alleviate the negative consequences of competition. Using the nation-wide survey of employers, I find that exclusive insurers charged 39-42 less for a unit of insurance quality than non-exclusive insurers. Furthermore, I find that the pattern of insurance quality dispersion is consistent with the exclusive insurers offering more high quality plans.

• Item Type: MPRA Paper
• Language: English
• Keywords: health insurance; exclusive contract; subsidy; vertical restraint; signaling
• Subjects: I - Health, Education, and Welfare > I1 - Health > I11 - Analysis of Health Care Markets; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory; G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance ; Insurance Companies ; Actuarial Studies; L - Industrial Organization > L4 - Antitrust Issues and Policies > L42 - Vertical Restraints ; Resale Price Maintenance ; Quantity Discounts; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J32 - Nonwage Labor Costs and Benefits ; Retirement Plans ; Private Pensions

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