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The Elasticity of Demand for Health Maintenance Organizations

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  • W. P. Welch

Abstract

This paper analyzes a national sample of firms where employees faced a choice between a Health Maintenance Organization (HMO) and a conventional insurer such as Blue Cross. A regression analysis is specified as a partial adjustment model and a logit functional form. The long-run price elasticity of demand for HMOs is estimated to be -0.6. To the extent that employers pass on increases in the total premium, the price elasticities facing insurers are higher. Furthermore, the demand for HMOs is a negative function of the copayment charged by the HMO for an office visit.

Suggested Citation

  • W. P. Welch, 1986. "The Elasticity of Demand for Health Maintenance Organizations," Journal of Human Resources, University of Wisconsin Press, vol. 21(2), pages 252-266.
    • Handle: RePEc:uwp:jhriss:v:21:y:1986:i:2:p:252-266
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    Cited by:

    1. David M. Cutler & Sarah Reber, 1996. "Paying for Health Insurance: The Tradeoff between Competition and Adverse Selection," NBER Working Papers 5796, National Bureau of Economic Research, Inc.
    2. Wedig, Gerard J. & Tai-Seale, Ming, 2002. "The effect of report cards on consumer choice in the health insurance market," Journal of Health Economics, Elsevier, vol. 21(6), pages 1031-1048, November.
    3. Beaulieu, Nancy Dean, 2002. "Quality information and consumer health plan choices," Journal of Health Economics, Elsevier, vol. 21(1), pages 43-63, January.
    4. Goldman, Dana & Leibowitz, Arleen & Robalino, David, 2004. "Employee Responses to Health Insurance Premium Increases," MPRA Paper 12004, University Library of Munich, Germany.
    5. Bokhari, Farasat A.S., 2009. "Managed care competition and the adoption of hospital technology: The case of cardiac catheterization," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 223-237, March.
    6. Shi Bo & Chen Wen, 2018. "Individual Health Insurance Market with an Entrant – The ACA Health Insurance Exchange Observations," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 12(2), pages 1-27, July.

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