The Shutdown
Black Like Me

Market Power

By Jonathan B. Wight

It is a no-brainer that business people don’t really like competitive market capitalism, despite all their exhortations about the value of markets.  Just read any of The Wealth of Nations to find Adam Smith with the same view.  Business people much prefer rigged markets, as long as they are on the inside. 

So it is no surprise that new research finds that converting health care insurance from non-profit to for-profit leads to a rise in premiums (not the fall that would be anticipated because of greater market efficiencies). 

Leemore Dafney reports on this in “Does It Matter if Your Health Insurer Is For Profit? Effects of Ownership on Premiums, Insurance Coverage, and Medical Spending,” in the latest edition of the American Economic Journal: Economic Policy (2019, 11(1): 222–265): 

“I find both the BCBS affiliate and its rivals increased premiums following conversions in markets where the converting affiliate had substantial market share….The results suggest for-profit insurers are likelier than not for- profit insurers to exercise market power when they possess it.”

Next time someone says that markets are a solution that will bring down prices in privatized sectors, remember that context matters.  Context, context, context


Feed You can follow this conversation by subscribing to the comment feed for this post.

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Your comment could not be posted. Error type:
Your comment has been posted. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.


Post a comment

Your Information

(Name is required. Email address will not be displayed with the comment.)