Risk Adjustment in Health Insurance Markets: Do Not Overlook the "Real" Healthy.

Objectives: The goals of this paper are: (1) to identify groups of healthy people; and (2) to quantify the extent to which the Dutch risk adjustment (RA) model overpays insurers for these groups.

Background: There have been strong signals that insurers in the Dutch regulated health insurance market engage in actions to attract healthy people. A potential explanation for this behavior is that the Dutch RA model overpays insurers for healthy people.

Improving diagnosis-based cost groups in the Dutch risk equalization model: the effects of a new clustering method and allowing for multimorbidity.

Health insurance markets with community-rated premiums typically use risk equalization (RE) to compensate insurers for predictable profits on people in good health and predictable losses on those with a chronic disease. Over the past decades RE models have evolved from simple demographic models to sophisticated health-based models. Despite the improvements, however, non-trivial predictable profits and losses remain.

How to deal with persistently low/high spenders in health plan payment systems?

Health insurance markets with community-rated premiums typically include risk adjustment (RA) to mitigate selection problems. Over the past decades, RA systems have evolved from simple demographic models to sophisticated morbidity-based models. Even the most sophisticated models, however, tend to overcompensate people with persistently low spending and undercompensate those with persistently high spending.

Selection Incentives for Health Insurers in the Presence of Sophisticated Risk Adjustment.

This article analyzes selection incentives for insurers in the Dutch basic health insurance market, which operates with community-rated premiums and sophisticated risk adjustment. Selection incentives result from the interplay of three market characteristics: possible actions by insurers, consumer response to these actions, and predictable variation in profitability of insurance contracts. After a qualitative analysis of the first two characteristics our primary objective is to identify the third.

Risk equalization in competitive health insurance markets: Identifying healthy individuals on the basis of multiple-year low spending.

Objective: To study the extent to which risk equalization (RE) in competitive health insurance markets can be improved by including an indicator for being healthy.

Study Setting/data Sources: This study is conducted in the context of the Dutch individual health insurance market. Administrative data on spending and risk characteristics (2011-2014) for the entire population (N = 16.

Diagnosis-based Cost Groups in the Dutch Risk-equalization Model: Effects of Clustering Diagnoses and of Allowing Patients to be Classified into Multiple Risk-classes.

Background: The risk-equalization (RE) model in the Dutch health insurance market has evolved to a sophisticated model containing direct proxies for health. However, it still has important imperfections, leaving incentives for risk selection. This paper focuses on refining an important health-based risk-adjuster in this model: the diagnosis-based costs groups (DCGs).

Improving risk equalization for individuals with persistently high costs: Experiences from the Netherlands.

Background: Risk-equalization (RE) models in competitive health insurance markets have become increasingly sophisticated. However, these models still have important imperfections. A specific problem in the Netherlands is that insurers are insufficiently compensated for individuals who can persistently be found in the right-end tail of the cost distribution.

The impact of copayments on mental healthcare utilization: a natural experiment.

Empirical evidence suggests that people are fairly sensitive to cost sharing arrangements in ambulatory mental healthcare. However, pure cost sharing effects are typically hard to measure due to the presence of adverse selection effects. In this paper, we examine the impact of cost sharing on mental healthcare utilization in the context of mandatory health insurance where adverse selection is absent.

Improving risk equalization using information on physiotherapy diagnoses.

Background: Worldwide, risk-equalization (RE) models in competitive health insurance markets have evolved from simple demographic models to sophisticated models containing diagnosis and pharmacy-based indicators of health. However, these models still have important imperfections; adding information on (diagnoses of) physiotherapy treatment may further improve RE-models. Therefore, a new risk-adjuster based on physiotherapy costs in the prior year was introduced in the Dutch RE-model of 2016.

Improving risk equalization with constrained regression.

State-of-the-art risk equalization models undercompensate some risk groups and overcompensate others, leaving systematic incentives for risk selection. A natural approach to reducing the under- or overcompensation for a particular group is enriching the risk equalization model with risk adjustor variables that indicate membership in that group. For some groups, however, appropriate risk adjustor variables may not (yet) be available.

How can the regulator show evidence of (no) risk selection in health insurance markets? Conceptual framework and empirical evidence.

If consumers have a choice of health plan, risk selection is often a serious problem (e.g., as in Germany, Israel, the Netherlands, the United States of America, and Switzerland).

Risk Selection Threatens Quality Of Care For Certain Patients: Lessons From Europe's Health Insurance Exchanges.

Experience in European health insurance exchanges indicates that even with the best risk-adjustment formulas, insurers have substantial incentives to engage in risk selection. The potentially most worrisome form of risk selection is skimping on the quality of care for underpriced high-cost patients--that is, patients for whom insurers are compensated at a rate lower than the predicted health care expenses of these patients. In this article we draw lessons for the United States from twenty years of experience with health insurance exchanges in Europe, where risk selection is a serious problem.

Risk selection in a regulated health insurance market: a review of the concept, possibilities and effects.

The Dutch basic health insurance is based on the principles of regulated competition. This implies that insurers and providers compete on price and quality while the regulator sets certain rules to achieve public objectives such as solidarity. Two regulatory aspects of this scheme are that insurers are not allowed to risk rate their premiums and are compensated for predictable variation in individual medical expenses (i.

Risk equalization in The Netherlands: an empirical evaluation.

The Netherlands relies on risk equalization to compensate competing health insurers for predictable variation in individual medical expenses. Without accurate risk equalization insurers are confronted with incentives for risk selection. The goal of this study is to evaluate the improvement in predictive accuracy of the Dutch risk equalization model since its introduction in 1993.

Performance profiling in primary care: does the choice of statistical model matter?

Background: Profiling is increasingly being used to generate input for improvement efforts in health care. For these efforts to be successful, profiles must reflect true provider performance, requiring an appropriate statistical model. Sophisticated models are available to account for the specific features of performance data, but they may be difficult to use and explain to providers.

Profiling individual physicians using administrative data from a single insurer: variance components, reliability, and implications for performance improvement efforts.

Background: Individual physicians are increasingly being subjected to comparative performance assessments. When single-insurer data are used to profile individual physicians' performance, reliable measurements are uncertain because of small sample sizes.

Methods: Administrative data (2006-2008) from a Dutch insurer are used to examine variation in general practitioners' (GPs) performance on expenses (5 measures), utilization of hospital care (2 measures), and clinical quality for diabetes and chronic obstructive pulmonary disease (6 measures).

A new prevention paradox: the trade-off between reducing incentives for risk selection and increasing the incentives for prevention for health insurers.

The Dutch risk equalization scheme has been improved over the years by including health related risk adjusters. The purpose of the Dutch risk equalization scheme is to prevent risk selection and to correct for predictable losses and gains for insurers. The objective of this paper is to explore the financial incentives for risk selection under the Dutch risk equalization scheme.

Improving risk equalization using multiple-year high cost as a health indicator.

Background: More and more competitive health insurance markets use risk equalization to compensate health plans for the predictable high costs of chronically ill enrollees. In the presence of premium rate restrictions, an important goal of risk equalization is to reduce incentives for selection, while maintaining incentives for efficiency. The literature shows, however, that even the most sophisticated risk equalization models--which include both diagnoses-based and pharmacy-based indicators of health status--do not reduce incentives for selection sufficiently.

Risk-adjusting the doughnut hole to improve efficiency and equity.

An important goal of consumer cost-sharing in health insurance is to increase incentives for cost containment. A relatively new cost-sharing phenomenon is the "doughnut hole": a gap in coverage starting at a predefined level of medical expenses. An important question is where to locate the starting point to achieve the strongest incentives for cost containment.

Diagnostic, pharmacy-based, and self-reported health measures in risk equalization models.

Background: Current research on the added value of self-reported health measures for risk equalization modeling does not include all types of self-reported health measures; and/or is compared with a limited set of medically diagnosed or pharmacy-based diseases; and/or is limited to specific populations of high-risk individuals.

Objective: The objective of our study is to determine the predictive power of all types of self-reported health measures for prospective modeling of health care expenditures in a general population of adult Dutch sickness fund enrollees, given that pharmacy and diagnostic data from administrative records are already included in the risk equalization formula.

Research Design: We used 4 models of 2002 total, inpatient and outpatient expenditures to evaluate the separate and combined predictive ability of 2 kinds of data: (1) Pharmacy-based (PCGs) and Diagnosis-based (DCGs) Cost Groups and (2) summarized self-reported health information.

A limited-sample benchmark approach to assess and improve the performance of risk equalization models.

A new method is proposed to assess and improve the performance of risk equalization models in competitive markets for individual health insurance, where compensation is intended for variation in observed expenditures due to so-called S(ubsidy)-type risk factors but not for variation due to other, so-called N(on-subsidy)-type risk factors. Given the availability of a rich subsample of individuals for which normative expenditures, Y(NORM), can be accurately determined, we make two contributions: (a) any risk equalization scheme applied to the entire population, Y(REF), should be evaluated through its performance in the subsample, by comparing Y(REF) with Y(NORM) (not by comparing Y(REF) with observed expenditures, Y, in the entire population, as commonly done); (b) conventional risk equalization schemes can be improved by the subsample regression of Y(NORM), rather than Y, on the risk adjusters that are observable in the entire population. This new method is illustrated by an application to the 2004 Dutch risk equalization model.

Prior use of durable medical equipment as a risk adjuster for health-based capitation.

This paper examines a new risk adjuster for capitation payments to Dutch health plans, based on the prior use of durable medical equipment (DME). The essence is to classify users of DME in a previous year into clinically homogeneous classes and to apply the resulting classification as a risk adjuster for capitation payments in the subsequent year. We evaluate 143 DME types in terms of incentives, validity, predictive value, and measurability, resulting in 14 functional disability classes (FDCs).

Health-based risk adjustment: improving the pharmacy-based cost group model by adding diagnostic cost groups.

Since 1991, risk-adjusted premium subsidies have existed in the Dutch social health insurance sector, which covered about two-thirds of the population until 2006. In 2002, pharmacy-based cost groups (PCGs) were included in the demographic risk adjustment model, which improved the goodness-of-fit, as measured by the R2, to 11.5%.

Free choice of health plan combined with risk-adjusted capitation payments: are switchers and new enrolees good risks?

It is well established in the literature that the young and healthy are more inclined to switch health plan, given the opportunity. In countries where risk-adjusted capitation payments are used to create a level playing field for the competing health plans, as is the case in The Netherlands, it is important to determine whether plans could exploit such selective switching to gain unfair advantage. This study analyses whether various risk-adjustment models are capable of compensating adequately for selective switching in the Dutch sickness fund sector.

Deductibles and health care expenditures: empirical estimates of price sensitivity based on administrative data.

Objective: To estimate the price sensitivity of demand for health care by analysing the relation between deductibles and expenditures found in an administrative database.

Data: Data are from 100,048 privately insured in the Netherlands. Information is available on expenditures in 1996, demographic variables, deductibles, and both diagnoses from hospitalisations and pharmacy costs for the years 1993-1995.