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Free choice of health plan combined with risk-adjusted capitation payments: are switchers and new enrolees good risks?

  • René C.J.A. van Vliet

    (Institute of Health Policy and Management, Erasmus University of Rotterdam, The Netherlands)

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    It is well established in the literature that the young and healthy are more inclined to switch health plan, given the opportunity. In countries where risk-adjusted capitation payments are used to create a level playing field for the competing health plans, as is the case in The Netherlands, it is important to determine whether plans could exploit such selective switching to gain unfair advantage. This study analyses whether various risk-adjustment models are capable of compensating adequately for selective switching in the Dutch sickness fund sector. Data concern information on health care expenditures, demographics and indicators of chronic diseases for 10 million members from 21 funds. Results indicate that switchers in 2000-2001 had expenditures that were around 40% below average in 1994-2002, confirming that movers are 'good' risks in absolute terms. However, after taking into account that these people are younger and healthier, the risk-adjusted payments for them nearly equalled actual expenditures. This holds for both people who in fact switched from one fund to another, and for those who were forced by regulation to leave the private insurance sector and who had to choose a sickness fund. Importantly, models using only demographics could not achieve this. Copyright © 2006 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/hec.1102
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    Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

    Volume (Year): 15 (2006)
    Issue (Month): 8 ()
    Pages: 763-774

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    Handle: RePEc:wly:hlthec:v:15:y:2006:i:8:p:763-774
    Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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    1. Anne Beeson Royalty & Neil Solomon, 1999. "Health Plan Choice: Price Elasticities in a Managed Competition Setting," Journal of Human Resources, University of Wisconsin Press, vol. 34(1), pages 1-41.
    2. Robert Nuscheler & Thomas Knaus, 2005. "Risk selection in the German public health insurance system," Health Economics, John Wiley & Sons, Ltd., vol. 14(12), pages 1253-1271.
    3. Feldman, Roger & Dowd, Bryan, 2000. "Risk segmentation: goal or problem?," Journal of Health Economics, Elsevier, vol. 19(4), pages 499-512, July.
    4. David M. Cutler & Richard J. Zeckhauser, 1997. "Adverse Selection in Health Insurance," NBER Working Papers 6107, National Bureau of Economic Research, Inc.
    5. Dowd, Bryan, et al, 1991. "Health Plan Choice and the Utilization of Health Care Services," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 85-93, February.
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