TY  - JOUR
AU  - Baker,Laurence C.
AU  - Corts,Kenneth S.
TI  - The Effects of HMOs on Conventional Insurance Premiums: Theory and      Evidence
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5356
PY  - 1995
Y2  - November 1995
UR  - http://www.nber.org/papers/w5356
L1  - http://www.nber.org/papers/w5356.pdf
N1  - Author contact info:
Laurence C. Baker
Department of Health Research & Policy
HRP Redwood Bldg, Rm T110
Stanford University
Stanford, CA 94305-5405
Tel: 650/723-4098
Fax: 650/725-6951
E-Mail: laurence.baker@stanford.edu

Kenneth Corts
University of Toronto
E-Mail: kenneth.corts@rotman.utoronto.ca
AB  - We develop a model of imperfectly competitive insurers that compete with HMOs for consumers who have private information about their health status.  We illustrate two conflicting effects of increasing HMO activity on conventional insurance premiums.  We term these effects market discipline -- HMO competition may limit the ability of insurers to exercise market power, thus driving prices down -- and market segmentation -- HMOs may skim the healthiest patients, thus driving insurers' costs and prices up.  We empirically examine the relative importance of these effects using data from a firm-level survey that provides data on premiums, together with market-level measures of HMO activity.  Our results suggest that the market segmentation effect is important, and that increases in HMO activity may increase insurance premiums.
ER  -