ABSTRACT
In this paper we examine the pricing behaviour of nonprofit health insurers in the Dutch social health insurance market. Since for-profit insurers were not allowed in this market, potential spillover effects from the presence of for-profit insurers on the behaviour of nonprofit insurers were absent. Using a panel data set for all health insurers operating in the Dutch social health insurance market over the period 1996-2004, we estimate a premium model to determine which factors explain the price setting behaviour of nonprofit health insurers. We find that financial stability rather than profit maximisation offers the best explanation for health plan pricing behaviour. In the presence of weak price competition, health insurers did not set premiums to maximize profits. Nevertheless, our findings suggest that regulations on financial reserves are needed to restrict premiums.