Institute for Healthcare Management and Research
CINCH - Health Economics Research Center
Weststadttürme Berliner Platz 6-8
Institutional Affiliation: University of Duisberg-Essen
NBER Working Papers and Publications
|December 2018||Reinsurance, Repayments, and Risk Adjustment in Individual Health Insurance: Germany, The Netherlands and the U.S. Marketplaces|
with Thomas G. McGuire, Richard C. van Kleef: w25374
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. ...