Panel Paper:
Multimarket Contact in Health Insurance
Saturday, November 10, 2018
Harding - Mezz Level (Marriott Wardman Park)
*Names in bold indicate Presenter
Many industries, including health insurance, are characterized by a handful of large firms that compete in multiple markets. Such overlap across markets, defined as multimarket contact (MMC), may facilitate tacit collusion and thus reduce the intensity of competition. We examine the effects of MMC on health insurance prices and quality using comprehensive data on the Medicare Advantage (MA) market from 2008 through 2015. Our estimation strategy exploits two plausibly exogenous changes to MMC: 1) a merger-induced change in MMC due to consolidations in other markets; and 2) MA policy changes in which benchmark rates were increased in a subset of markets, therefore affecting MMC even in markets otherwise unaffected by the policy itself. Across a range of estimates and alternative measures of MMC, our results consistently support the mutual forbearance hypothesis, where we find that prices are significantly higher and quality significantly lower as MMC increases.
Full Paper:
- MMC and MA Manuscript.pdf (530.5KB)
