Competitive bidding for health insurance contracts: lessons from the online HMO auctions
- PDF / 665,125 Bytes
- 20 Pages / 439.37 x 666.142 pts Page_size
- 26 Downloads / 186 Views
Competitive bidding for health insurance contracts: lessons from the online HMO auctions Alok Gupta · Stephen T. Parente · Pallab Sanyal
Received: 10 August 2012 / Accepted: 9 November 2012 / Published online: 6 December 2012 © Springer Science+Business Media New York 2012
Abstract Healthcare is an important social and economic component of modern society, and the effective use of information technology in this industry is critical to its success. As health insurance premiums continue to rise, competitive bidding may be useful in generating stronger price competition and lower premium costs for employers and possibly, government agencies. In this paper, we assess an endeavor by several Fortune 500 companies to reduce healthcare procurement costs for their employees by having HMOs compete in open electronic auctions. Although the auctions were successful in generating significant cost savings for the companies in the first year, i.e., 1999, they failed to replicate the success and were eventually discontinued after two more years. Over the past decade since the failed auction experiment, effective utilization of information technologies have led to significant advances in the design of complex electronic markets. Using this knowledge, and data from the auctions, we point out several shortcomings of the auction design that, we believe, led to the discontinuation of the market after three years. Based on our analysis, we propose several actionable recommendations that policy makers can use to design a sustainable electronic market for procuring health insurance. Keywords
Electronic market design · Auctions · Health insurance procurement · HMO
A. Gupta Department of Information and Decision Sciences, Carlson School of Management, University of Minnesota, 321, 19th Avenue South, Room 3-122, Minneapolis, MN 55455, USA e-mail: [email protected] S. T. Parente (B) Department of Finance, Carlson School of Management, University of Minnesota, 321, 19th Avenue South, Room 3-122, Minneapolis, MN 55455, USA e-mail: [email protected] P. Sanyal Department of Information Systems and Operations Management, School of Management, George Mason University, 4400 University Drive, MS 1B1, Fairfax, VA 22030, USA e-mail: [email protected]
123
304
JEL Classification
A. Gupta et al.
I1 · D44 · G22
Introduction The healthcare sector is a crucial and socially challenging component of modern economies. Policy makers and healthcare leaders are faced with the dual challenges of increasing access to quality healthcare services while also limiting the rate of growth in healthcare spending. The recent passage of the Patient Protection and Affordable Care Act (PPACA) in 2010 is intended to both increase insurance coverage and slow the healthcare expenditures. Insurance coverage is projected by the Centers for Medicare and Medicaid (CMS) Office of the Actuary to be expanded by 34 million citizens by 2019.1 This expansion is planned to be accomplished using competitive bidding of private insurers to offer a set of public insurance options that will b
Data Loading...
