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Annual Research Meeting (ARM)

Annual Research Meeting (ARM). AcademyHealth, Orlando, 03Jun07 Evaluation of the Dutch Risk Equalization system: are the insurers confronted with predictable losses for the chronically ill? Wynand P.M.M. van de Ven (vandeven@bmg.eur.nl) Pieter J.A. Stam Rene C.J.A. Van Vliet

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Annual Research Meeting (ARM)

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  1. Annual Research Meeting (ARM) AcademyHealth, Orlando, 03Jun07 Evaluation of the Dutch Risk Equalization system: are the insurers confronted with predictable losses for the chronically ill? Wynand P.M.M. van de Ven (vandeven@bmg.eur.nl) Pieter J.A. StamRene C.J.A. Van Vliet Erasmus University Rotterdam

  2. Health Insurance Act: 01jan06 • Mandate for everyone in the Netherlands to buy private health insurance; • Standard benefits package; • Selective contracting allowed; • Open enrolment per product per insurer; • Community rating per product per insurer per province; • Risk equalization.

  3. Risk Equalization Fund (REF) Gov’t contribution (18-) REF 50% REF-payment based on risk adjusters Income-related contribution 50% Insurer Insured premium (18+) Two thirds of all households receive an income-related care allowance (at most € 420 per person per year)

  4. Risk adjusters in the Dutch REF

  5. Effects of selection • Disincentive for insurers to be responsive to the high-risk consumers and contract the best quality care for them; • Disincentive for providers to acquire the best reputation for treating chronic diseases; • Selection more profitable than efficiency; • High premiums for high-risk patients; • Instability in the insurance market.

  6. Objective & Research questions Objective: evaluate the risk equalization system. Research questions: • Are there identifiable subgroups of consumers with predictable lossses? • If so: How large are these subgroups? And how large are the predictable losses?In particular we focus on subgroups of persons with a chronic condition or with above average utilization rates in previous years.

  7. Method • Data: all information in the files of a large insurer (Agis) over the period 1998 – 2004, combined with an individual health survey (held in 2001); some 30,000 observations. • Method: the Dutch 2007 risk adjusters are applied to the 2004-data. By comparing the predicted 2004-expenditures (based on the 2007 risk adjusters) with their actual 2004-expenditures we calculated the average profits and losses for many subgroups.

  8. Results (costs and losses in euro)

  9. Results (costs and losses in euro)

  10. Results (costs and losses in euro)

  11. Conclusions 1. Many subgroups, from <1% to 30% of population, with predictable losses in the order of hundreds to thousands euros per person per year. 2. Also predictable losses for subgroups of insured whose disease is included as a risk adjuster in the risk equalization formula (e.g. heart problems, cancer, …). 3. Improvement of the risk equalization system needs a high priority. Otherwise the disadvantages due to risk selection may outweigh the advantages of competition.

  12. New (potential) risk-adjusters • Diagnostic information not only from prior hospitalization, but from all prior medical encounters (Diagnosis Treatment Combinations, DTCs) expected to be implemented in 2009; • Multiyear-DCG’s; • A better indicator of invalidity (or functional heath status); • Yes/no voluntary deductible; • ……

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