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Addressing Market Segmentation and Incentives for Risk Selection: How Well Does Risk Equalisation in the Irish Private Health Insurance Market Work?

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Listed:
  • Conor Keegan

    (Economic and Social Research Institute, Dublin)

  • Conor Teljeur

    (Health Information and Quality Authority)

  • Brian Turner

    (University College Cork)

  • Steve Thomas

    (Trinity College Dublin)

Abstract

This study assesses the efficacy of Ireland’s recently introduced risk equalisation scheme in its voluntary health insurance market. Robust risk equalisation is especially important in an Irish context given acute risk segmentation and incentives for risk selection that have evolved within the market. Using uniquely acquired VHI data (N=1,235,922) this analysis assesses the predictive efficacy of both current and alternative risk equalisation specifications. Results suggest that the low predictive power of the current risk equalisation design (R2 = 6.8 per cent) is not appropriately correcting for anti-competitive incentives and asymmetries in the market. Improvements to the current design could be achieved through the introduction of diagnosis-based risk adjusters.

Suggested Citation

  • Conor Keegan & Conor Teljeur & Brian Turner & Steve Thomas, 2017. "Addressing Market Segmentation and Incentives for Risk Selection: How Well Does Risk Equalisation in the Irish Private Health Insurance Market Work?," The Economic and Social Review, Economic and Social Studies, vol. 48(1), pages 61-84.
  • Handle: RePEc:eso:journl:v:48:y:2017:i:1:p:61-84
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    Keywords

    risk equalisation; health insurance; Ireland;

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