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PubMedDate not supplied

Managed competition in California's small-group insurance market.

This paper describes the early experience of the Health Insurance Plan of California (the HIPC), a small-employer purchasing cooperative established in 1993. The plan's experience is consistent with the predictions of advocates of market-oriented health care reform: The program's design has encouraged cost-conscious choice by enrollees, which in turn has generated price competition among plans. Differences across the HIPC's six rating regions conform with the notion that health care competition is less viable is sparsely populated areas. Evidence on risk selection suggests that while the HIPC as a whole has not experienced adverse selection, certain plans within the program have received a disproportionate share of high-cost enrollees.

California↗
PubMed2001

Employer contribution methods and health insurance premiums: does managed competition work?

We derive a two-stage model in which health plans first compete to be selected by employers and subsequently compete to be chosen by employees. We identify the key determinants of competition and show that increasing competition at one stage often comes at the expense of competition at the other stage. Many economists and policymakers have argued that in order to increase competition among health plans, employers should offer multiple plans and structure premium contributions to make employees more price sensitive. While our theoretical model shows that following this policy prescription may not actually lead to lower premiums, our empirical analysis provides some support for this recommendation. We also find that if employers instead pay the full premium, premiums increase when they offer additional plans. These results have important implications for both employers and policymakers.

Consumer Behavior↗
PubMed2003

Demand for a Medicare prescription drug benefit: exploring consumer preferences under a managed competition framework.

Several proposals for adding a prescription drug benefit to the Medicare program rely on consumer choice and market forces to promote efficiency. However, little information exists regarding: 1) the extent of price sensitivity for such plans among Medicare beneficiaries, or 2) the extent to which drug-only insurance plans using various cost-control mechanisms might experience adverse selection. Using data from a survey of elderly Wisconsin residents regarding their likely choices from a menu of hypothetical drug plans, we show that respondents are likely to be price sensitive with respect to both premiums and out-of-pocket costs but that selection problems may arise in these markets. Outside intervention may be necessary to ensure the feasibility of a market-based approach to a Medicare drug benefit.

Aged↗
PubMed1997

Small group reform in a competitive managed care market: the case of California, 1993 to 1995.

State-level insurance reforms designed to make health insurance more accessible for small businesses and their employees have become common in the 1990s. This study examines the effects of small group reform legislation enacted in California in 1993. Using survey data on health benefits in small firms, we look at changes in health insurance coverage that occurred between spring 1993 (just before reform) and spring 1995. Our results indicate that insurance became slightly more affordable and, among businesses with three to nine employees, employer provision increased more than 10 percentage points. Provision was unchanged among larger-sized businesses, however. Managed care penetration increased considerably. We argue that California's competitive health insurance market, which already was dominated by managed care, represented a favorable environment for small group reform. In this context, the modest growth in insurance provision highlights the limited potential of incremental reforms for expanding insurance coverage.

California↗
PubMed2006

Hospital competition, managed care, and mortality after hospitalization for medical conditions: evidence from three states.

This study assessed the effect of hospital competition and HMO penetration on mortality after hospitalization for six medical conditions in California, New York, and Wisconsin. We used linked hospital-discharge and vital-statistics data to study adults hospitalized for myocardial infarction, hip fracture, stroke, gastrointestinal hemorrhage, congestive heart failure, or diabetes. We estimated logistic regression models with death within 30 days of admission as the dependent variable and hospital competition, HMO penetration, and hospital and patient characteristics as explanatory variables. Higher hospital competition was associated with lower mortality in California and New York but not Wisconsin. Higher HMO penetration was associated with lower mortality in California but higher mortality in New York. These findings suggest that hospitals in highly competitive markets compete on quality even in the absence of mature managed-care markets. The findings also underscore the need to consider geographic effects in studies of market structure and hospital quality.

Economic Competition↗