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Incentives for risk selection and omitted variables in the risk adjustment formula

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  • Erik SCHOKKAERT
  • Carine VAN DE VOORDE

Abstract

Risk adjustment in health insurance raises the question of how to treat variables which influence health care expenditures but do not capture acceptable costs differences. We argue that these variables should be included in the explanatory model and neutralized afterwards for the computation of the premium subsidies. This explicit approach is better than the conventional approach in removing the incentives for cream-skimming. We illustrate the empirical relevancy of the problem with data for Belgium.

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File URL: http://www.jstor.org/stable/20079173
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Bibliographic Info

Article provided by ENSAE in its journal Annals of Economics and Statistics.

Volume (Year): (2006)
Issue (Month): 83-84 ()
Pages: 327-351

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Handle: RePEc:adr:anecst:y:2006:i:83-84:p:13

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Cited by:
  1. FLEURBAEY, Marc & SCHOKKAERT, Erik, 2007. "Unfair inequalities in health and health care," CORE Discussion Papers 2007090, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Erik Schokkaert & Carine Van De Voorde, 2007. "Direct versus indirect standaardization in risk adjustment," Center for Economic Studies - Discussion papers ces0733, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.

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