Selective contracting and foreclosure in health care markets

Jan Boone and Gijsbert Zwart

No 7576, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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: Anti-competitive effects; Exclusion; Foreclosure; Health insurance; Selective contracting; Uninsured (search for similar items in EconPapers)
JEL-codes: G22 I11 L42 (search for similar items in EconPapers)
Date: 2009-11
New Economics Papers: this item is included in nep-com, nep-hea, nep-ias and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Working Paper: Selective contracting and foreclosure in health care markets (2010)
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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