Mandatory pooling as a supplement to risk-adjusted capitation payments in a competitive health insurance market

Abstract

AbstractÐRisk-adjusted capitation payments (RACPs) to competing health insurers are an essential element of market-oriented health care reforms in many countries. RACPs based on demographic variables only are insucient, because they leave ample room for cream skimming. However, the implementation of improved RACPs does not appear to be straightforward. A solution might be to supplement imperfect RACPs with a form of mandatory pooling that reduces the incentives for cream skimming. In a previous paper it was concluded that high-risk pooling (HRP), is a promising supplement to RACPs. The purpose of this paper is to compare HRP with two other main variants of mandatory pooling. These variants are called excess-of-loss (EOL) and proportional pooling (PP). Each variant includes ex post compensations to insurers for some members which depend to various degrees on actually incurred costs. Therefore, these pooling variants reduce the incentives for cream skimming which are inherent in imperfect RACPs, but they also reduce the incentives for eciency and cost containment. As a rough measure of the latter incentives we use the percentage of total costs for which an insurer is at risk. This paper analyzes which of the three main pooling variants yields the greatest reduction of incentives for cream skimming given such a percentage. The results show that HRP is the most eective of the three pooling variants. #

Determinants of health care utilization by German sickness fund members ‐ with application to risk adjustment

“…The numbers -measured by the adjusted R-squarevary between 1 and 2% of total variance in the US [4,7] and 5% in the Netherlands [8]. In contrast, inclusion of diagnostic information can raise these values to 9-15% [8].…”

“…The numbers -measured by the adjusted R-squarevary between 1 and 2% of total variance in the US [4,7] and 5% in the Netherlands [8]. In contrast, inclusion of diagnostic information can raise these values to 9-15% [8]. For Switzerland, Spycher [9] finds that age, sex and geographical region can explain only 5:2% of the variance of expenditures in 1998, while including a dummy for hospital treatment in the previous year increases this figure to 11:6%.…”

Optimal cost reimbursement of health insurers to reduce risk selection

“…In empirical studies, van Barneveld et al (1998Barneveld et al ( , 2001) compare these selective forms of cost reimbursement to outlier risk sharing and proportional risk sharing. They find that risk sharing for high risks as well as risk sharing for high costs is superior in reducing incentives for risk selection to outlier risk sharing and proportional risk sharing.…”

Hybrid Risk Adjustment for Pharmaceutical Benefits

“…Differently, if we include only ex post individual information in the payment formula, we reduce the risk assumed by health plans, and therefore the incentives for risk selection, although also the incentives for efficiency. When those models use ex post information on cost instead of other indicators of need, they belong to what has been called in the literature a risk sharing formula [30,31,35], while when they use ex post information on diagnosis, they present a concurrent risk adjustment scheme [34].…”