1. Justin Sydnor, PhD
Leslie P. Schultz Professor in Risk Management and Insurance
Wisconsin School of Business
University of Wisconsin, Madison

2. Two visions for WI healthcare
Existing vision
Many smaller insurers
Narrow networks
Cost control: HMO practices
Alternative vision
Few large insurers
Large networks
Cost control: “consumer directed” approach

3. Effects of insurer concentration?
In theory could go either way
Big insurers have leverage with providers
But big insurers have market power with buyers
Dafny et al. (2012) studied merger between Aetna and Prudential in 1999.
More concentration = higher premiums
Lowered pay to physicians but little pass through.

4. Effects of network size?
Gruber and McNight (2016) studied MA state employee health insurance.
“Natural experiment” that pushed some employees toward narrow-network community HMO plans over broader-network PPO plans.
Conclude: “Limited network plans are saving money by directing care towards primary care and away from downstream spending.”

5. HMO vs “Consumer-directed”?
Both shown to limit spending.
Brot-Goldberg et al (2016) studied shift to high-deductible plans at large employer
HDHP reduced total spending by around 12%
But people pulled back in bad ways, including on preventative care and chronic care.

6. How this relates to self-funding?
Research broadly supports current model.
WAHP members in line with positive research
State employee program setup currently supports
Other self-insured states hard to compare
Wisconsin has different (more competitive) starting point.

7. Important open questions
How well do large third-party administrators bargain for self-insured clients?
No research on this that I could find.
Could a third-party administrator effectively include smaller integrated health organizations into a coverage network?

8. Thank you