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What Is Health Insurance (Good) For? pp 175–200Cite as

Group Purchasing

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Abstract

Chapter 6 describes ways in which the matching of supply and demand determines the features of health insurance plans in the marketplace. This chapter examines the role of group purchasing as a form of health insurance policy. The chapter begins with a consideration of how group health insurance is priced. While the actuarial principles of group pricing are the same across health insurance markets, the pricing of health insurance varies between employer-provided and social insurance plans depending in part on the subsidy group purchasers may decide to give to plan members. Group pricing must also account for the management of prepaid healthcare as a part of health plans, as well as the role of clinical judgment in determining the scope and price of group insurance plans. The chapter then explores at greater length the outsourcing versus insourcing conundrum introduced in Chap. 5. Group health insurers, especially employers and governments, have choices about what services to supply, and which services to demand on behalf of members. There is also an interplay between these two groups, as employers can adopt third-party payment systems developed for public insurance plans, and vice versa. The flexibility of certain group purchasers over what services to provide also leads to opportunities for bargaining between potential health insurers. Finally, the chapter on group purchasing examines the trend for the increased use of social insurance by many segments of the population. The introduction of new public programs and the growth of existing programs combines policy choices, demographic shifts, and macroeconomic changes. As a result, the ACA and other recent health insurance policies have increased group purchasing by the U.S. federal government and, to a lesser extent, by state governments. That trend motivates a brief discussion of how the United States and other countries continue to alter group purchasing policies in response to changes in the health economy. Finally, the chapter segues into an examination of the role of government policy in health insurance markets in Chap. 8.

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Notes

  1. 1.

    Note that an explicit policy of paying healthy people more would likely fall afoul of antidiscrimination laws like the Americans with Disabilities Act (ADA) (Moss and Burris 2007). However, an employer could use incentive based compensation to reward workers that are more productive, thereby implicitly increasing pay for those who are able and willing to work more.

  2. 2.

    Medicare could attempt to copyright the DRG system, but as a governmental entity it instead makes the system publicly available as a government created system.

  3. 3.

    A small proportion of the population (around 10 %) opts out and purchases private health insurance. “An upper-income group, the self-employed, and civil servants are eligible for the private health insurance system, which offers more extensive coverage, and in which premium calculation is regulated in a unique way: insurers must offer long-term contracts at a guaranteed renewable rate involving front-loading of premiums and insurance of premium risk” (Hofmann and Browne 2013).

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  1. Department of Public Health, College of Education, Health, and Human Sciences, University of Tennessee, Knoxville, TN, USA

    Robert D. Lieberthal

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Correspondence to Robert D. Lieberthal .

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Lieberthal, R.D. (2016). Group Purchasing. In: What Is Health Insurance (Good) For?. Springer, Cham. https://doi.org/10.1007/978-3-319-43796-5_7

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