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Fine-Tuning of Health Insurance Regulation - Unhealthy Consequences for an Individual Insurer

Author

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  • Johannes Schoder
  • Michele Sennhauser
  • Peter Zweifel

Abstract

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.

Suggested Citation

  • Johannes Schoder & Michele Sennhauser & Peter Zweifel, 2010. "Fine-Tuning of Health Insurance Regulation - Unhealthy Consequences for an Individual Insurer," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 17(3), pages 313-327.
    • Handle: RePEc:taf:ijecbs:v:17:y:2010:i:3:p:313-327
    DOI: 10.1080/13571516.2010.513812
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    Citations

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    Cited by:

    1. H. E. Frech & Peter Zweifel, 2017. "Market Socialism and Community Rating in Health Insurance," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(3), pages 405-427, September.
    2. Peter Zweifel & H. E. Frech, 2016. "Why ‘Optimal’ Payment for Healthcare Providers Can Never be Optimal Under Community Rating," Applied Health Economics and Health Policy, Springer, vol. 14(1), pages 9-20, February.
    3. Peter Zweifel, 2013. "Managed Care: Prescription for Failure? Lessons from Switzerland," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(01), pages 27-31, April.
    4. Peter Zweifel, 2013. "Managed Care: Prescription for Failure? Lessons from Switzerland," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(1), pages 27-31, 04.
    5. repec:ces:ifodic:v:11:y:2013:i:1:p:19078507 is not listed on IDEAS
    6. Peter Zweifel, 2013. "The present state of health economics: a critique and an agenda for the future," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(4), pages 569-571, August.

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