Abstract
Managed care health insurers in the USA restrict their enrollees' choice of hospitals to within specific networks. This paper considers the implications of these restrictions. A three-step econometric model is used to predict consumer preferences over health plans conditional on the hospitals they offer. The results indicate that consumers place a positive and significant weight on their expected utility from the hospital network when choosing plans. A welfare analysis, assuming fixed prices, implies that restricting consumers' choice of hospitals leads to a loss to society of approximately $1 billion per year across the 43 US markets considered. This figure may be outweighed by the price reductions generated by the restriction.
Original language | English (US) |
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Pages (from-to) | 1039-1079 |
Number of pages | 41 |
Journal | Journal of Applied Econometrics |
Volume | 21 |
Issue number | 7 |
DOIs | |
State | Published - Nov 2006 |
Externally published | Yes |
All Science Journal Classification (ASJC) codes
- Social Sciences (miscellaneous)
- Economics and Econometrics