A critical review of the use of R in risk equalization research.

Nearly all empirical studies that estimate the coefficients of a risk equalization formula present the value of the statistical measure R. The R-value is often (implicitly) interpreted as a measure of the extent to which the risk equalization payments remove the regulation-induced predictable profits and losses on the insured, with a higher R-value indicating a better performance. In many cases, however, we do not know whether a model with R = 0.

A framework for ex-ante evaluation of the potential effects of risk equalization and risk sharing in health insurance markets with regulated competition.

Many health insurance markets are organized by principles of regulated competition. Regulators of these markets typically apply risk equalization (aka risk adjustment) and risk sharing to mitigate risk selection. Risk equalization and risk sharing can have various positive and negative effects on efficiency and fairness.

Scope and Incentives for Risk Selection in Health Insurance Markets With Regulated Competition: A Conceptual Framework and International Comparison.

In health insurance markets with regulated competition, regulators face the challenge of preventing risk selection. This paper provides a framework for analyzing the scope (i.e.

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.

Heteroscedasticity of residual spending after risk equalization: a potential source of selection incentives in health insurance markets with premium regulation.

Many community-rated health insurance markets include risk equalization (also known as risk adjustment) to mitigate risk selection incentives for competing insurers. Empirical evaluations of risk equalization typically quantify selection incentives through predictable profits and losses net of risk equalization for various groups of consumers (e.g.

Predictable profits and losses in a health insurance market with risk equalization: A multiple-contract period perspective.

Many social health insurance systems rely on 'regulated competition' among insurers to improve efficiency. In the presence of community-rated premiums, risk equalization is an important regulatory feature to mitigate risk-selection incentives in such systems. Empirical studies evaluating selection incentives have typically quantified group-level (un)profitability for one contract period.

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.

How the COVID-19 pandemic can distort risk adjustment of health plan payment.

The COVID-19 pandemic has led to disruptions in healthcare utilization and spending. While some changes might persist (e.g.

Very high and low residual spenders in private health insurance markets: Germany, The Netherlands and the U.S. Marketplaces.

We study the extremely high and low residual spenders in individual health insurance markets in three countries. A high (low) residual spender is someone for whom the residual-spending less payment (from premiums and risk adjustment)-is high (low), indicating that the person is highly underpaid (overpaid). We begin with descriptive analysis of the top and bottom 1% and 0.

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.

Deriving risk adjustment payment weights to maximize efficiency of health insurance markets.

Risk-adjustment is critical to the functioning of regulated health insurance markets. To date, estimation and evaluation of a risk-adjustment model has been based on statistical rather than economic objective functions. We develop a framework where the objective of risk-adjustment is to minimize the efficiency loss from service-level distortions due to adverse selection, and we use the framework to develop a welfare-grounded method for estimating risk-adjustment weights.

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 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.

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.

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).