Competition and Scale Economy Effects of the Dutch 2006 Health-Care Insurance Reform

Jacob Bikker ()

The Geneva Papers on Risk and Insurance - Issues and Practice, 2017, vol. 42, issue 1, No 4, 53-78

Abstract: Abstract This paper investigates competitive behaviour and scale economies of the health-care insurance market in the Netherlands over the period 1995–2012. We focus on the impact on the market structure of the 2006 health-care reform, which replaced the dual system of public and private insurance with a single compulsory health insurance scheme in which insurance providers compete for customers in a free market. We start with estimating unused scale economies and find that, after the health-care reform in 2006, unused scale economies at around 20 per cent are much higher than before the reform (4 per cent), pointing to a relative increase of fixed costs. Our interpretation of this change is that fixed costs increased after the reform, as insurers now have to monitor care providers and negotiate with them about lower prices or higher quality. To measure competition directly, we apply a novel approach that estimates the impact of marginal costs as an indicator of inefficiency on either market shares or net profits. Over time, competition in health insurance has increased significantly, but reform-induced market turbulences in 2006 caused a fall in the average level of competitive pressure. After the reform, competition continued to improve.

Keywords: competition; concentration; health-care insurance; performance-conduct-structure model; scale economies; G22; H51; L11-L13 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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DOI: 10.1057/s41288-016-0038-8

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