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Risk sharing as a supplement to imperfect capitation: a tradeoff between selection and efficiency
E M van Barneveld1, L M Lamers, R C van Vliet
1Department of Health Policy and Management, Erasmus University Rotterdam, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands. e.van.barneveld@agis-groep.nl
Journal of Health Economics
|March 17, 2001
Summary
This study examines risk sharing between health insurers and regulators, finding that current methods like outlier or proportional risk sharing may not be optimal. Alternative risk-sharing strategies could better balance insurer selection and efficiency incentives.
Area of Science:
- Health economics
- Insurance market regulation
- Risk management
Background:
- Competitive individual health insurance markets face challenges with imperfect risk adjustment.
- Capitation payments can incentivize adverse selection and reduce efficiency.
- Regulators use risk-sharing mechanisms to mitigate these issues.
Purpose of the Study:
- To analyze the impact of risk sharing on insurer incentives for selection and efficiency.
- To determine the optimal extent of risk sharing in health insurance markets.
- To compare different risk-sharing methods.
Main Methods:
- Theoretical analysis of risk-sharing models.
- Empirical investigation of various risk-sharing forms.
- Evaluation of tradeoffs between selection and efficiency.
Main Results:
- Risk sharing reduces insurer incentives for both selection and efficiency.
- The optimal level of risk sharing depends on regulatory priorities.
- Current outlier or proportional risk sharing may not be the most effective.
Conclusions:
- Alternative risk-sharing mechanisms can offer improved tradeoffs.
- Regulators should consider diverse risk-sharing strategies.
- Optimizing risk sharing is crucial for efficient health insurance markets.
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