Adjusting for risk selection in state health insurance exchanges will be critically important and feasible, but not easy (original) (raw)
Related papers
Insurers' response to selection risk: Evidence from Medicare enrollment reforms ଝ
Journal of health economics, 56, pp. 383-396, 2017
Evidence on insurers' behavior in environments with both risk selection and market power is largely missing. We fill this gap by providing one of the first empirical accounts of how insurers adjust plan features when faced with potential changes in selection. Our strategy exploits a 2012 reform allowing Medicare enrollees to switch to 5-star contracts at anytime. This policy increased enrollment into 5-star contracts, but without risk selection worsening. Our findings show that this is due to 5-star plans lowering both premiums and generosity, thus becoming more appealing for most beneficiaries, but less so for those in worse health conditions.
Adverse Selection into and within the Individual Health Insurance Market in California in 2014
Health Services Research, 2018
Objective. The Affordable Care Act (ACA) introduced reforms to mitigate adverse selection into and within the individual insurance market. We examined the traits and predicted medical spending of enrollees in California post-ACA. Data Sources. Survey of 2,103 enrollees in individual market plans, on-and offexchange, in 2014. Study Design. We compared actual versus potential participants using data from the 2014 California Health Interview Survey on respondents who were individually insured or uninsured. We predicted annual medical spending for each group using age, sex, self-rated health, body mass index, smoking status, and income.
Journal of Health Economics, 2000
A competitive market for individual health insurance tends to risk-adjusted premiums. Premium rate restrictions are often considered a tool to increase access to coverage for high-risk individuals in such a market. However, such regulation induces selection which may have several adverse effects. As an alternative approach we consider risk-adjusted premium subsidies. Empirical results of simulated premium models and subsidy formulae are presented. It is shown that sufficiently adjusted subsidies eliminate the need for premium rate restrictions and consequently avoid their adverse effects. Therefore, the subsidy approach is the preferred strategy to increase access to coverage for high-risk individuals. q
Risk selection in the Massachusetts State employee health insurance program
Health care management science, 2001
Using the Diagnostic Cost Group (DCG) model developed from a national sample, we examine biased selection among one fee-for-service (FFS) plan, one preferred provider organization, and several health maintenance organizations (HMOs) in Massachusetts. The proportions of enrollees in low-risk groups are higher in the HMO plans and lower in the FFS plan. The average age in the FFS plan is 9 years greater than that in the HMO plans. Actual premiums are not consistent with risk levels among HMO plans, resulting in gains in some HMO plans and losses in others as high as 20% compared to expected expenses as computed by the DCG model.
Making the Affordable Care Act Work: High-Risk Pools and Health Insurance Marketplaces
The Forum, 2013
As the Affordable Care Act is likely to persist, we should shift our attention toward actually making it work. However, this may be even more challenging than overcoming the initial political opposition. One of the most daunting problems is to make fifty-one insurance exchanges (marketplaces) 1 across the country into viable, self-sufficient, and effective entities. Consumer demographics pose a significant challenge to these marketplaces, one that may lead to their demise. Ultimately, it may be prudent to continue high-risk pools as a supplement to marketplaces in order to offer lower premiums in the marketplaces and provide an opportunity for learning. This strategy could be made acceptable to both Republicans and Democrats.
2018
ISSUE: Certain forms of individual health coverage are not required to comply with the consumer protections of the Affordable Care Act (ACA). These "alternative coverage arrangements"-including transitional policies, short-term plans, health care sharing ministries, and association health plans-tend to have lower upfront costs and offer far fewer benefits than ACA-compliant insurance. While appealing to some healthy individuals, they are often unattractive, or unavailable, to people in lessthan-perfect health. By leveraging their regulatory advantages to enroll healthy individuals, these alternatives to marketplace coverage may contribute to a smaller, sicker, and less stable ACA-compliant market. The Trump administration recently has acted to reduce federal barriers to these arrangements. GOAL: To understand how states regulate coverage arrangements that do not comply with the ACA's individual health insurance market reforms. METHODS: Analysis of the applicable laws, regulations, and guidance of the 50 states and the District of Columbia. FINDINGS AND CONCLUSIONS: No state's regulatory framework fully protects the individual market from adverse selection by the alternative coverage arrangements studied. However, states have the authority to ensure a level playing field among coverage options to promote market stability. KEY TAKEAWAYS "Alternative coverage arrangements" that are not required to comply with the Affordable Care Act's consumer protections tend to have lower upfront costs but offer fewer benefits than ACA-compliant insurance. Many of these alternative coverage options, including short-term plans and association plans, threaten the individualmarket risk pool by siphoning off healthier enrollees, leaving sicker and costlier enrollees in ACAcompliant plans. States may want to consider regulatory options for protecting their individual insurance markets and their insured beneficiaries from the effects of alternative coverage products.
Fine‐Tuning of Health Insurance Regulation – Unhealthy Consequences for an Individual Insurer
International Journal of The Economics of Business, 2010
This paper sheds light on some unexpected consequences of health insurance regulation that may pose a big challenge to insurers' risk management. Because mandated uniform contributions to health insurance trigger risk‐selection efforts, risk adjustment (RA) schemes become necessary. A good deal of research into the optimal RA formula has been performed. A recent proposal in Switzerland has been to add ‘Hospitalization exceeding three days during the previous year’ as an indicator of high risk. Applying the new formula to an individual Swiss health insurer, its payments into the RA scheme are predicted to increase substantially, reaching up to 13% of premium income. Its mistake had been to implement Managed Care successfully, resulting in low rates of hospitalization. The expected risk management response is to extend hospital stays beyond three days, contrary to stated policy objectives.
Risk adjustment in health insurance and its long-term effectiveness
Journal of Health Economics, 2010
This paper seeks to create new insights when judging the impact different risk adjustment schemes may have on the incentive to select risks. It distinguishes risk types with high and low profit potential and estimates long-run profits associated with risk selection in four scenarios (no risk adjustment, demographic only, including prior hospitalization, and including prior hospitalization and Pharmaceutical Cost Groups). The database covers 180,000 Swiss individuals over 8 years, 3 of which are used for model building and 5, to estimate insurers' profits due to risk selection in the four scenarios. While these profits prove to be very high without risk adjustment and still substantial with demographic risk adjustment, they become surprisingly low when the crude morbidity indicator 'prior hospitalization' is included in the formula. These results clearly indicate the need for health status-related risk adjustment in insurance markets with community rating, taking into account insurers' planning horizon.
Risk Sharing and Risk Adjustment Strategies to Deal with Health Plan Selection and Efficiency
Health care cost escalation is a serious problem in many countries and many researchers point to managed care through capitation as an important tool for controlling costs while fostering cost-e¤ectiveness. While capitation can create desirable e¢ ciency incentives, it also creates strong selection incentives. This paper compares the e¤ectiveness of risk adjustment and risk sharing strategies through four di¤erent reimbursement payment systems for reducing the welfare loss due to selection in the health care market. Selection and e¢ ciency incentives enter in a three-stage model in which consumers choose provider, pro…t maximizing plans decide the schedule of services o¤ered, and regulator select the payment system that minimizes a social welfare loss. Minimum welfare loss risk adjustment is superior to other risk adjustment strategies, but only uniformly superior to risk sharing when the quality of the information used by the payer is high enough.