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How Important Is Price Variation Between Health Insurers?

Author

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  • Stuart V. Craig
  • Keith Marzilli Ericson
  • Amanda Starc

Abstract

Prices negotiated between payers and providers affect a health insurance contract's value via enrollees' cost-sharing and self-insured employers' costs. However, price variation across payers is hard to observe. We measure negotiated prices for hospital-payer pairs in Massachusetts and characterize price variation. Between-payer price variation is similar in magnitude to between-hospital price variation. Administrative-services-only contracts, in which insurers do not bear risk, have higher prices. We model negotiation incentives and show that contractual form and demand responsiveness to negotiated prices are important determinants of negotiated prices.

Suggested Citation

  • Stuart V. Craig & Keith Marzilli Ericson & Amanda Starc, 2018. "How Important Is Price Variation Between Health Insurers?," NBER Working Papers 25190, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25190
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    References listed on IDEAS

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    1. Gautam Gowrisankaran & Aviv Nevo & Robert Town, 2015. "Mergers When Prices Are Negotiated: Evidence from the Hospital Industry," American Economic Review, American Economic Association, vol. 105(1), pages 172-203, January.
    2. Randall D. Cebul & James B. Rebitzer & Lowell J. Taylor & Mark E. Votruba, 2011. "Unhealthy Insurance Markets: Search Frictions and the Cost and Quality of Health Insurance," American Economic Review, American Economic Association, vol. 101(5), pages 1842-1871, August.
    3. Katherine Ho, 2009. "Insurer-Provider Networks in the Medical Care Market," American Economic Review, American Economic Association, vol. 99(1), pages 393-430, March.
    4. Alan M. Garber & Jonathan Skinner, 2008. "Is American Health Care Uniquely Inefficient?," Journal of Economic Perspectives, American Economic Association, vol. 22(4), pages 27-50, Fall.
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    Cited by:

    1. Kimberley H Geissler & Benjamin Lubin & Keith M Marzilli Ericson, 2020. "The association between patient sharing network structure and healthcare costs," PLOS ONE, Public Library of Science, vol. 15(6), pages 1-13, June.
    2. Toren L. Fronsdal & Jay Bhattacharya & Suzanne Tamang, 2020. "Variation in Health Care Prices Across Public and Private Payers," NBER Working Papers 27490, National Bureau of Economic Research, Inc.
    3. Timothy J. Layton & Nicole Maestas & Daniel Prinz & Boris Vabson, 2019. "Private vs. Public Provision of Social Insurance: Evidence from Medicaid," NBER Working Papers 26042, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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