Selective contracting and foreclosure in health care markets

Michiel Bijlsma, Jan Boone (j.boone@cpb.nl) and Gijsbert Zwart
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Jan Boone: CPB Netherlands Bureau for Economic Policy Analysis

No 140, CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: This paper provides an analysis of 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.

JEL-codes: G22 I11 L42 (search for similar items in EconPapers)
Date: 2010-02
New Economics Papers: this item is included in nep-com, nep-hea and nep-ias
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Selective contracting and foreclosure in health care markets (2009)
Working Paper: Selective Contracting and Foreclosure in Health Care Markets (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cpb:discus:140

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