Efficiency in Employment-Based Health Insurance: The Potential for Supra-marginal Cost Pricing

W. David Bradford

Economic Inquiry, 1996, vol. 34, issue 2, 341-56

Abstract: Currently, the majority of privately insured individuals in the United States are insured through their employers. This has significant implications for competition and the ability of a 'competitive' insurance industry to assure marginal-cost pricing. The central barrier to competition arises when employers restrict their employees' ability to select among insurance carriers. Several models of insurer profit maximization are explored that demonstrate that supramarginal cost pricing is likely to persist even when the insurance market appears competitive. Copyright 1996 by Oxford University Press.

Date: 1996
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