Glenn College Colloquium - Middle Men or Innovators? The Role of Insurers in Cost and Productivity in Health Care

Middle Men or Innovators? The Role of Insurers in Cost and Productivity in Health Care

We study innovation and productivity of U.S. private health insurers.  We aggregate information from more than 4800 natural experiments in which employers force over 34,000 workers to switch health insurance plans to recover the distribution of insurer treatment effects on health care spending, prices, quantities, and more granular measures of utilization. We find that insurers do differ in meaningful ways, and insurer assignment explains up to 15% of total medical spending. However, the value of this differentiation is constrained because consumers do not sort into plans on the basis of insurers' comparative advantages, and because insurers are ineffective at shifting utilization away from low-value care or towards high-value care.  We decompose the effects of insurer assignment on prices into components explained by bargaining, network design, and sorting within networks, finding modest differences in spending effects explained primarily by bargaining and sorting.  Our findings raise questions about the value of managed competition by showing that, even in a competitive insurance market with a range of structurally diverse insurers, there is limited evidence that reassigning individuals across insurers has meaningful impacts on the efficiency or composition of health care delivery.

Professor Kurt Lavetti is an Associate Professor in the Department of Economics at Ohio State University, a Research Associate at the National Bureau of Economic Research, and Research Fellow at the Institute for the Study of Labor (IZA). 

His research in health and labor economics focuses on questions related to the design and value of health insurance plans, the estimation of compensating wage differentials, determinants of job mobility and impacts of non-competition contracts, and physician labor markets and organizations.

No registration required. Attend in person at Page Hall Room 130 (LEC) or on Zoom by clicking "Join on Zoom".