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EFFICIENCY IN EMPLOYMENT BASED HEALTH INSURANCE: THE POTENTIAL FOR SUPRA‐MARGINAL COST PRICING
Author(s) -
Bradford W. David
Publication year - 1996
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1996.tb01381.x
Subject(s) - marginal cost , competition (biology) , economics , health insurance , maximization , actuarial science , microeconomics , business , health care , ecology , biology , economic growth
Currently, the majority if privately insured individuals in the U.S. are insured through their employers. This has significant implications for competition and the ability qf a “competitive” insurance industry to assure marginal‐cost pricing. The central barrier to competition arises when employers restrict their employees' ability to select among insurance carriers. Several models 4 insurer proft maximization are explored which demonstrate that supra‐marginal cost pricing is likely to persist euen when the insurance market appears “cornpetitiue.”