Mandatory High-Risk Pooling: An Approach to Reducing Incentives for Cream Skimming

Risk-adjusted capitation payments (RACPs) to competing health insurers are an essential element of market-oriented health care reforms in The Netherlands. Crude RACPs are inadequate, especially because they encourage insurers to select against people expected to be unprofitable—a practice called cre...

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Bibliographic Details
Published in:Inquiry (Chicago) 1996-07, Vol.33 (2), p.133-143
Main Authors: van Barneveld, Erik M., van Vliet, René C. J. A., van de Ven, Wynand P. M. M.
Format: Article
Language:English
Subjects:
Automobile insurance
Capitation
Capitation Fee - organization & administration
Capitation Fee - statistics & numerical data
Cost Control
Cost efficiency
Cost incentives
Cream
Financial risk
Health care industry
Health Care Reform - economics
Health Care Reform - organization & administration
Health Care Reform - statistics & numerical data
Health Expenditures - statistics & numerical data
Health insurance
Insurance pools
Insurance Pools - economics
Insurance Pools - legislation & jurisprudence
Insurance Pools - statistics & numerical data
Insurance premiums
Insurance providers
Insurance regulation
Insurance Selection Bias
National Health Programs - legislation & jurisprudence
Netherlands
Reforms
Regression Analysis
Reimbursement, Incentive - economics
Reimbursement, Incentive - legislation & jurisprudence
Reimbursement, Incentive - statistics & numerical data
Risk management
Risk Management - legislation & jurisprudence
Risk Management - methods
Single-Payer System
Statistical analysis
Studies
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Summary:Risk-adjusted capitation payments (RACPs) to competing health insurers are an essential element of market-oriented health care reforms in The Netherlands. Crude RACPs are inadequate, especially because they encourage insurers to select against people expected to be unprofitable—a practice called cream skimming. However, implementing improved RACPs does not appear to be straightforward. This paper analyzes an approach that, given a system of crude RACPs, reduces insurers' incentives for cream skimming in the market for individual health insurance, while preserving incentives for efficiency and cost containment. Under the proposed system of Mandatory High-Risk Pooling (MHRP), each insurer would be allowed to periodically predetermine a small fraction of its members whose costs would be (partially) pooled. The pool would be financed with mandatory, flat-rate contributions. The results suggest that MHRP is a promising supplement to RACPs.
ISSN:0046-9580
1945-7243