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Monopoly, Monopsony and Contestability in Health Insurance: A Study of Blue Cross Plans

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  • Foreman, Stephen Earl
  • Wilson, John Anderson
  • Scheffler, Richard M

Abstract

As dominant sellers of health insurance and buyers of health services, Blue Cross and Blue Shield have potential monopoly and monopsony power. The credible threat of entry resulting from the increased competitiveness of these markets in the 1980s may have produced competitive outcomes--reduced prices, improved quality, and efficient cost structures--even in a concentrated market. The authors find the plans used economies of scale and monopsony power to reduce administrative costs, provide payments and consumer premiums. Their findings suggest that steps to enhance the contestability of health markets may be a better response than regulation. Copyright 1996 by Oxford University Press.

Suggested Citation

  • Foreman, Stephen Earl & Wilson, John Anderson & Scheffler, Richard M, 1996. "Monopoly, Monopsony and Contestability in Health Insurance: A Study of Blue Cross Plans," Economic Inquiry, Western Economic Association International, vol. 34(4), pages 662-677, October.
    • Handle: RePEc:oup:ecinqu:v:34:y:1996:i:4:p:662-77
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    Cited by:

    1. R. Halbersma & M. Mikkers & E. Motchenkova & I. Seinen, 2011. "Market structure and hospital–insurer bargaining in the Netherlands," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 12(6), pages 589-603, December.
    2. Gaynor, Martin & Vogt, William B., 2000. "Antitrust and competition in health care markets," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 27, pages 1405-1487, Elsevier.
    3. Elizabeth L. Munnich & Michael R. Richards, 2020. "Treatment flows after outsourcing public insurance provision: Evidence from Florida Medicaid," Health Economics, John Wiley & Sons, Ltd., vol. 29(11), pages 1343-1363, November.
    4. Leo Turcotte & John Robst & Solomon Polachek, 2006. "Medical interventions among pregnant women in fee-for-service and managed care insurance: a propensity score analysis," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1513-1525.
    5. Donald Alexander & Jon Neill, 2015. "The Impact of Market Share on Health Insurance Premiums," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(4), pages 477-488, December.

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