Working Paper: CEPR ID: DP7576
Authors: Michiel Bijlsma; Jan Boone; Gijsbert Zwart
Abstract: We analyze exclusive contracts between health care providers and insurers in a model where some consumers choose to stay uninsured. In case of a monopoly insurer, exclusion of a provider changes the distribution of consumers who choose not to insure. Although the foreclosed care provider remains active in the market for the non-insured, we show that exclusion leads to anti-competitive effects on this non-insured market. As a consequence exclusion can raise industry profits, and then occurs in equilibrium. Under competitive insurance markets, the anticompetitive exclusive equilibrium survives.Uninsured consumers, however, are now not better off without exclusion. Competition among insurers raises prices in equilibria without exclusion, as a result of a horizontal analogue to the double marginalization effect. Instead, under competitive insurance markets exclusion is desirable as long as no provider is excluded by all insurers.
Keywords: anticompetitive effects; exclusion; foreclosure; health insurance; selective contracting; uninsured
JEL Codes: G22; I11; L42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Exclusion of a provider (Y60) | Higher prices for uninsured care (I13) |
| Exclusion of a provider (Y60) | Higher industry profits (L19) |
| Selective contracting (L33) | Higher prices for uninsured care (I13) |
| Selective contracting (L33) | Lower insurance premiums (G52) |
| Higher prices for uninsured care (I13) | Uninsured consumers worse off (G52) |
| Selective contracting (L33) | Reduced choice for consumers (D16) |