This paper estimates a model of commercial HMO premiums based on Nash's axiomatic approach to bargaining between HMOs and employers. The bargaining models incor porate variables that measure the 'power' of the parties to affect the division of potential gains from a contract. It is found that an increase in the number of competing HMOs increases the employer's bargaining power and leads to lower premiums, especially for for-profit HMOs. It is also found that employers' bargaining power over non-profit HMOs is positively related to the ratio of the HMO's administrative expenses/total expenses.
Bibliographical noteFunding Information:
ACKNOWLEDGEMENTS This research was supported by the Robert Wood Johnson Foundation’s Health Care Financing and Organization initiative.