Capping Risk Adjustment?
AbstractWhen premiums are community-rated, risk adjustment (RA) serves to mitigate competitive insurers’ incentive to select favorable risks. However, unless fully prospective, it also undermines their incentives for efficiency. By capping its volume, one may try to counteract this tendency, exposing insurers to some financial risk. This in term runs counter the quest to refine the RA formula, which would increase RA volume. Specifically, the adjuster, ”Hospitalization or living in a nursing home during the previous year” will be added in Switzerland starting 2012. This paper investigates how to minimize the opportunity cost of capping RA in terms of increased incentives for risk selection.
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Bibliographic InfoPaper provided by University of Zurich, Socioeconomic Institute in its series Working Papers with number 0915.
Length: 27 pages
Date of creation: Sep 2009
Date of revision:
Publication status: published in Journal of Health Economics, 29(4), pp. 499-507, 2010
Health insurance; regulation; risk adjustment; risk management;
Find related papers by JEL classification:
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-19 (All new papers)
- NEP-HEA-2009-09-19 (Health Economics)
- NEP-IAS-2009-09-19 (Insurance Economics)
- NEP-REG-2009-09-19 (Regulation)
- NEP-RMG-2009-09-19 (Risk Management)
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