Health Insurance in the Presence of Physician Price Discrimination

Rhema Vaithianathan

No 188, Working Papers from Department of Economics, The University of Auckland

Abstract: We model equilibrium in the health insurance market, when a monopolistic physician price discriminates on the basis of coinsurance rates. The physician extracts surplus created in the insurance market, leading to some consumers remaining uninsured. This 'hold-up' problem is solved if the physician and insurer integrate or enter a price agreement prior to writing the insurance contract. Both approaches improve insurer and physician profitability, and restore complete insurance market coverage. This paper therefore explains both partial insurance market coverage and the emergence of various contractual and ownership arrangements in the health insurance industry.

Keywords: Economics (search for similar items in EconPapers)
Date: 1998
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