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  3. American Economic Review
  4. April 2012
  5. Paying a Premium on Your Premium? Consolidation in the US Health Insurance Industry

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

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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)

Citation

Dafny, Leemore, Mark Duggan, and Subramaniam Ramanarayanan. 2012. "Paying a Premium on Your Premium? Consolidation in the US Health Insurance Industry." American Economic Review, 102 (2): 1161-85. DOI: 10.1257/aer.102.2.1161

Additional Materials

JEL Classification

  • G22 Insurance; Insurance Companies
  • I13 Health Insurance, Public and Private