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Risk Adjustment in Health Insurance Markets: Do Not Overlook the "Real" Healthy.

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Summary
This summary is machine-generated.

The Dutch risk adjustment model overpays insurers for healthy individuals, despite efforts to reduce profits. This suggests current risk adjustment variables are inadequate for identifying and managing healthy groups effectively.

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Area of Science:

  • Health economics
  • Insurance market regulation
  • Risk adjustment models

Background:

  • Insurers in the Dutch regulated health insurance market may attract healthy individuals.
  • This behavior could be driven by overpayment within the Dutch risk adjustment (RA) model for healthy enrollees.

Purpose of the Study:

  • Identify distinct groups of healthy individuals within the population.
  • Quantify the extent of overpayment by the Dutch RA model to insurers for these identified healthy groups.

Main Methods:

  • Utilized ex-ante information including administrative data on prior healthcare spending (N=17m), diagnoses from electronic patient records (N=1.3m), and health survey data (N=457k).
  • Calculated underpayments and overpayments for identified healthy groups using the Dutch RA model (2021 version).

Main Results:

  • Identified eight distinct groups of healthy individuals based on various identifiers.
  • While the Dutch RA model reduced predictable profits for these groups, significant overpayments persisted, ranging from €38 to €167 per person.

Conclusions:

  • The Dutch RA model does not fully eliminate profitability associated with insuring healthy individuals.
  • Current identifiers used for flagging healthy groups appear unsuitable as risk adjustment variables.
  • Constrained regression offers a potential alternative for estimating RA models to eliminate healthy group profitability.