Exogenous Exits, Market Structure, and Equilibrium Contracts in Healthcare

Serna, Natalia

doi:10.1257/aeri.20240155

Abstract

This paper quantifies the causal effects of exogenous health insurer exits on contract structure and healthcare market outcomes, proposing market concentration as a likely mechanism for these effects. Leveraging the termination of the largest health insurer in Colombia, I find that the use of fee-for-service contracts increased after the termination relative to capitation contracts. Treatment effects are larger in markets with higher provider than insurer concentration at baseline. Results suggest that equilibrium contracts place the financial risk on insurers in markets where providers have higher bargaining leverage.

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