Reinsurance, Repayments, and Risk Adjustment in Individual Health Insurance: Germany, The Netherlands and the U.S. Marketplaces / Thomas G. McGuire, Sonja Schillo, Richard C. van Kleef.

Format:

Book

Author/Creator:

McGuire, Thomas G.

Contributor:

National Bureau of Economic Research.

Schillo, Sonja.

van Kleef, Richard C.

Series:

Working Paper Series (National Bureau of Economic Research) no. w25374.

NBER working paper series no. w25374

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Reinsurance, Repayments, and Risk Adjustment in Individual Health Insurance

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

Reinsurance can complement risk adjustment of health plan payments to improve fit of payments to plan spending at the individual and group level. This paper proposes three improvements in health plan payment systems using reinsurance. First, we base reinsurance payments on spending not accounted for by the risk adjustment system, rather than just high spending. Second, we propose pairing reinsurance for individual-level losses with repayments for individual-level profits. Third, we optimize the weights on the risk adjustors taking account of the presence of reinsurance/repayment. We implement our methodology in data from Germany, The Netherlands and the U.S. Marketplaces, comparing our modified approach to plan payment with risk adjustment as currently practiced in the three settings. The combination of the three improvements yields very substantial improvements in the individual-level fit of payments to plan spending in all three countries.

Notes:

Print version record

December 2018.