Integrating risk adjustment and enrollee premiums in health plan payment

J Health Econ. 2013 Dec;32(6):1263-77. doi: 10.1016/j.jhealeco.2013.05.002.

Abstract

In two important health policy contexts - private plans in Medicare and the new state-run "Exchanges" created as part of the Affordable Care Act (ACA) - plan payments come from two sources: risk-adjusted payments from a Regulator and premiums charged to individual enrollees. This paper derives principles for integrating risk-adjusted payments and premium policy in individual health insurance markets based on fitting total plan payments to health plan costs per person as closely as possible. A least squares regression including both health status and variables used in premiums reveals the weights a Regulator should put on risk adjusters when markets determine premiums. We apply the methods to an Exchange-eligible population drawn from the Medical Expenditure Panel Survey (MEPS).

Keywords: Exchanges; Health insurance; I13; I18; Medicare; Premiums; Risk adjustment.

Publication types

  • Research Support, N.I.H., Extramural

MeSH terms

  • Adolescent
  • Adult
  • Algorithms
  • Empirical Research
  • Female
  • Health Expenditures
  • Health Insurance Exchanges
  • Humans
  • Insurance, Health / economics*
  • Male
  • Medicare / organization & administration*
  • Middle Aged
  • Patient Protection and Affordable Care Act
  • Private Sector
  • Regression Analysis
  • Risk Adjustment* / methods
  • Risk Adjustment* / statistics & numerical data
  • United States
  • Young Adult