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Health Affairs, Vol 16, Issue 2, 218-228
Copyright © 1997 by Project HOPE

DataWatch

Managed competition in California's small-group insurance market

This paper describes the early experience of the Health Insurance Plan of California (the HIPC), a small-employer purchasing cooperative established in 1993. The plan's experience is consistent with the predictions of advocates of market-oriented health care reform: The program's design has encouraged cost-conscious choice by enrollees, which in turn has generated price competition among plans. Differences across the HIPC's six rating regions conform with the notion that health care competition is less viable is sparsely populated areas. Evidence on risk selection suggests that while the HIPC as a whole has not experienced adverse selection, certain plans within the program have received a disproportionate share of high-cost enrollees.

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