In a health insurance market, a large employer or an organized ''buyer
alliance'' is in a position to influence the design of plans offered
to its members. We study how the sponsors of buyer alliances manage co
mpetition among insurance firms by focusing on their choices of the fo
rmat of competition, the number of firms allowed to compete, and the q
uality of care offered by the firms. We find deviations from optimalit
y in all three dimensions. Specifically, we find a tendency toward too
many firms and too much quality, and a bias toward a format involving
the prescreening of insurance plans by the sponsor.