Journal
INQUIRY-THE JOURNAL OF HEALTH CARE ORGANIZATION PROVISION AND FINANCING
Volume 50, Issue 4, Pages 255-274Publisher
SAGE PUBLICATIONS INC
DOI: 10.1177/0046958014538913
Keywords
Health Insurance; Exchanges; Reinsurance; Risk Adjustment; Adverse Selection
Funding
- National Institute of Mental Health [R01 MH094290]
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Risk adjustment and reinsurance protect plans against risk of losses and contend with adverse selection in the new health insurance Exchanges. This article assesses the power of reinsurance in the context of other plan payment features, including prospective and concurrent risk adjustment. Using data from the Medicare Expenditure Panel Survey (MEPS) to draw an Exchange population, we simulate the contribution of reinsurance to improving the fit of the payment system to plan costs and to mitigating incentives for adverse selection for groups of enrollees with selected chronic illnesses. Modest reductions in attachment points equate the payment-system fit of retrospective to concurrent risk adjustment. Reinsurance is very powerful in fitting payments to costs and moderately effective in dealing with selection incentives.
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