Competition in Health Care Markets and Vertical Restraints

This paper studies competition between Managed Care Organizations (MCOs) and “Conventional Insurers”. Most of the time, MCOs sign exclusive contracts with providers and these vertical restrictions associated to differentiation in the providers ‘market imply a risk segmentation. Taking into account this phenomenon, we show that vertical restrictions in the health insurance sector can paradoxically create an “anti-raise rivals cost effect” in which MCOs. penetration allows to decrease conventional insurers premiums.

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