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The goal of risk equalization in regulated competitive health insurance markets

Different opinions exist about the goal of risk equalization in regulated competitive health insurance markets. There seems to be consensus that an element of the goal of risk equalization is ‘to remove the predictable over- and undercompensations of subgroups of insured’ or, equivalently, ‘to achie...

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Autores principales: van de Ven, Wynand, Hamstra, Gerrit, van Kleef, Richard, Reuser, Mieke, Stam, Piet
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Springer Berlin Heidelberg 2022
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9877069/
https://www.ncbi.nlm.nih.gov/pubmed/35348921
http://dx.doi.org/10.1007/s10198-022-01457-7
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author van de Ven, Wynand
Hamstra, Gerrit
van Kleef, Richard
Reuser, Mieke
Stam, Piet
author_facet van de Ven, Wynand
Hamstra, Gerrit
van Kleef, Richard
Reuser, Mieke
Stam, Piet
author_sort van de Ven, Wynand
collection PubMed
description Different opinions exist about the goal of risk equalization in regulated competitive health insurance markets. There seems to be consensus that an element of the goal of risk equalization is ‘to remove the predictable over- and undercompensations of subgroups of insured’ or, equivalently, ‘to achieve a level playing field for each risk composition of an insurer’s portfolio’ or, equivalently, ‘to remove the incentives for risk selection’. However, the role of efficiency appears to be a major issue: should efficiency also be an element of the goal of risk equalization, or should it be a restriction to the goal, or should efficiency not be an element of the goal or a restriction to the goal? If efficiency plays a role, a comprehensive analysis of the total effect of risk equalization on efficiency needs to be done. An improvement of the performance of a risk equalization scheme has both negative and positive effects on efficiency. Negative effects include the reduction in efficiency via cost- or utilization-based risk adjusters. Positive effects result from leveling the playing field and reducing the incentives for risk selection, which increase efficiency as the outcome of a competitive market. In practice many regulators and policy makers take efficiency into consideration by looking at the negative effects, but hardly at the positive effects. The definition of the goal of risk equalization has consequences for the design and evaluation of risk equalization schemes and for the equalization payments. We describe relevant potential goals, tradeoffs and possible solutions.
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spelling pubmed-98770692023-01-27 The goal of risk equalization in regulated competitive health insurance markets van de Ven, Wynand Hamstra, Gerrit van Kleef, Richard Reuser, Mieke Stam, Piet Eur J Health Econ Original Paper Different opinions exist about the goal of risk equalization in regulated competitive health insurance markets. There seems to be consensus that an element of the goal of risk equalization is ‘to remove the predictable over- and undercompensations of subgroups of insured’ or, equivalently, ‘to achieve a level playing field for each risk composition of an insurer’s portfolio’ or, equivalently, ‘to remove the incentives for risk selection’. However, the role of efficiency appears to be a major issue: should efficiency also be an element of the goal of risk equalization, or should it be a restriction to the goal, or should efficiency not be an element of the goal or a restriction to the goal? If efficiency plays a role, a comprehensive analysis of the total effect of risk equalization on efficiency needs to be done. An improvement of the performance of a risk equalization scheme has both negative and positive effects on efficiency. Negative effects include the reduction in efficiency via cost- or utilization-based risk adjusters. Positive effects result from leveling the playing field and reducing the incentives for risk selection, which increase efficiency as the outcome of a competitive market. In practice many regulators and policy makers take efficiency into consideration by looking at the negative effects, but hardly at the positive effects. The definition of the goal of risk equalization has consequences for the design and evaluation of risk equalization schemes and for the equalization payments. We describe relevant potential goals, tradeoffs and possible solutions. Springer Berlin Heidelberg 2022-03-29 2023 /pmc/articles/PMC9877069/ /pubmed/35348921 http://dx.doi.org/10.1007/s10198-022-01457-7 Text en © The Author(s) 2022 https://creativecommons.org/licenses/by/4.0/Open AccessThis article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/ (https://creativecommons.org/licenses/by/4.0/) .
spellingShingle Original Paper
van de Ven, Wynand
Hamstra, Gerrit
van Kleef, Richard
Reuser, Mieke
Stam, Piet
The goal of risk equalization in regulated competitive health insurance markets
title The goal of risk equalization in regulated competitive health insurance markets
title_full The goal of risk equalization in regulated competitive health insurance markets
title_fullStr The goal of risk equalization in regulated competitive health insurance markets
title_full_unstemmed The goal of risk equalization in regulated competitive health insurance markets
title_short The goal of risk equalization in regulated competitive health insurance markets
title_sort goal of risk equalization in regulated competitive health insurance markets
topic Original Paper
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9877069/
https://www.ncbi.nlm.nih.gov/pubmed/35348921
http://dx.doi.org/10.1007/s10198-022-01457-7
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