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Tuesday, August 3 • 9:00am - 10:30am
3E3 Scope Economies in Commercial Health Insurance

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Tice Sirmans, Illinois State University; Patty Born, Florida State University

In markets where companies can offer multiple products or services, the cost of production may decline as the variety of products or services increases. We test whether these economies of scope exist among U.S. health insurers, who can offer a variety of health insurance products across different lines of business. Using a sample of insurers writing commercial health insurance business over the period 2010-2018, we provide evidence that insurers providing coverage in only one health insurance line of business have significantly higher underwriting profitability. However, these monoline insurers have significantly higher expense ratios. Among the majority of insurers that provide coverage in more than one line of business, we find variations in both underwriting performance and expense ratios across insurers that participate in multiple medical services lines (e.g., providing both individual and group plans) and those whose portfolios include other health lines which are not major medical expense lines (e.g., dental, vision). Our findings have important implications for understanding how changes to health insurer product portfolios may achieve the objectives of reducing insurer expenses and lowering consumers’ cost of coverage.

Discussant
YD

Yugang Ding

School of Economics Peking University

Presenters
TS

Tice Sirmans

Illinois State University
avatar for Patty Born

Patty Born

Florida State University
Dr. Patricia Born is the Midyette Eminent Scholar in Risk Management and Insurance in the Department of Risk Management/Insurance, Real Estate and Legal Studies at Florida State University’s College of Business. She also serves as advisor of the Risk Management and Insurance doctoral... Read More →



Tuesday August 3, 2021 9:00am - 10:30am EDT