Study: For-profit insurers more likely to exercise market power

For-profit insurers are more likely than not-for-profit insurers to exercise market power when they have it, according to a new study by Harvard Business School professor Leemore Dafney. The author looked at Blue Cross and Blue Shield affiliates that converted to for-profit status in 11 states spanning 28 geographic markets, and found that both the BCBS affiliate and its rivals increased premiums in markets where the converting affiliate had substantial market share. Medicaid enrollment rates also increased in these markets. “Future research on the impact of ownership form on dimensions beyond price – especially those related to quality, innovation and risk selection – is essential to obtaining a comprehensive perspective of the impact of for-profit ownership on insurer conduct,” the study notes.