Risk equalization in The Netherlands: an empirical evaluation.

Area of Science:

• Health economics
• Public health policy
• Insurance regulation

Background:

• The Netherlands uses risk equalization to manage financial risks among competing health insurers.
• Inaccurate risk equalization can lead to insurer risk selection, undermining equitable access to healthcare.
• Evaluating the evolution of the Dutch risk equalization model is crucial for understanding its effectiveness.

Purpose of the Study:

• To assess the predictive accuracy improvements of the Dutch risk equalization model since its inception in 1993.
• To quantify the extent of under- or overcompensation for different population subgroups under various model iterations.
• To determine if the current model adequately mitigates incentives for risk selection.

Main Methods:

• Estimation of successive Dutch risk equalization models using individual-level claims data (n=15.6 million).
• Analysis of under-/overcompensation using individual-level survey data (n=8735) across relevant subgroups.
• Longitudinal evaluation of model performance and predictive accuracy over time.

Main Results:

• Significant improvements in the risk equalization model's predictive accuracy have been observed since 1993.
• Despite enhancements, the 2012 model does not entirely eliminate incentives for risk selection.
• Disparities in compensation persist for certain population subgroups.

Conclusions:

• The Dutch risk equalization model has evolved and improved considerably over time.
• Current risk equalization mechanisms are insufficient to completely prevent risk selection by health insurers.
• Continued refinement of the risk equalization model is essential for achieving public health goals and ensuring fair competition.