Duke 2008 | ASHE | Equity and Efficiency in Health and Healthcare

The private health insurance industry in the US has experienced a great deal of consolidation during the last decade. At the same time, insurers have enjoyed a long period of high profits, raising the possibility of a causal link between the two trends. This project will try to establish whether there is a causal relationship between recent changes in industry concentration and profit margins (proxied by premiums). We will use a proprietary dataset on health plans offered by a sample of large, multisite employers between 1998 and 2006. Because consolidation of local health plans may be a reaction to expected premium growth in a given market rather than the cause, we will focus our attention on mergers of national health plans. For any given merger, local markets in which the two merging national carriers have the greatest pre-merger shares will experience the largest increases in concentration. We will estimate the effect of these exogenous changes in concentration on premium growth, controlling for other factors that may independently affect this growth. We intend to use our results to estimate the aggregate impact of consolidations between 1998 and 2006 on health plan prices.