High-risk pooling for mitigating risk selection incentives in health insurance markets with sophisticated risk equalization: an application based on health survey information.

BACKGROUND: Despite sophisticated risk equalization, insurers in regulated health insurance markets still face incentives to attract healthy people and avoid the chronically ill because of predictable differences in profitability between these groups. The traditional approach to mitigate such incentives for risk selection is to improve the risk-equalization model by adding or refining risk adjusters. However, not all potential risk adjusters are appropriate. One example are risk adjusters based on health survey information. Despite its predictiveness of future healthcare spending, such information is generally considered inappropriate for risk equalization, due to feasibility challenges and a potential lack of representativeness. METHODS: We study the effects of high-risk pooling (HRP) as a strategy for mitigating risk selection incentives in the presence of sophisticated- though imperfect- risk equalization. We simulate a HRP modality in which insurers can ex-ante assign predictably unprofitable individuals to a 'high risk pool' using information from a health survey. We evaluate the effect of five alternative pool sizes based on predicted residual spending post risk equalization on insurers' incentives for risk selection and cost control, and compare this to the situation without HRP. RESULTS: The results show that HRP based on health survey information can substantially reduce risk selection incentives. For example, eliminating the undercompensation for the top-1% with the highest predicted residual spending reduces selection incentives against the total group with a chronic disease (60% of the population) by approximately 25%. Overall, the selection incentives gradually decrease with a larger pool size. The largest marginal reduction is found moving from no high-risk pool to HRP for the top 1% individuals with the highest predicted residual spending. CONCLUSION: Our main conclusion is that HRP has the potential to considerably reduce remaining risk selection incentives at the expense of a relatively small reduction of incentives for cost control. The extent to which this can be achieved, however, depends on the design of the high-risk pool.

Selection Incentives in the Dutch Basic Health Insurance: To What Extent Does End-of-Life Spending Contribute to Predictable Profits and Losses for Selective Groups?

Existing risk-equalization models in individual health insurance markets with premium-rate restrictions do not completely compensate insurers for predictable profits/losses, confronting insurers with risk selection incentives. To guide further improvement of risk-equalization models, it is important to obtain insight into the drivers of remaining predictable profits/losses. This article studies a specific potential driver: end-of-life spending (defined here as spending in the last 1-5 years of life). Using administrative (N = 16.9 m) and health survey (N = 384 k) data from the Netherlands, we examine the extent to which end-of-life spending contributes to predictable profits/losses for selective groups. We do so by simulating the predictable profits/losses for these groups with and without end-of-life spending while correcting for the overall spending difference between these two situations. Our main finding is that-even under a sophisticated risk-equalization model-end-of-life spending can contribute to predictable losses for specific chronic conditions.

Incorporating self-reported health measures in risk equalization through constrained regression.

Most health insurance markets with premium-rate restrictions include a risk equalization system to compensate insurers for predictable variation in spending. Recent research has shown, however, that even the most sophisticated risk equalization systems tend to undercompensate (overcompensate) groups of people with poor (good) self-reported health, confronting insurers with incentives for risk selection. Self-reported health measures are generally considered infeasible for use as an explicit 'risk adjuster' in risk equalization models. This study examines an alternative way to exploit this information, namely through 'constrained regression' (CR). To do so, we use administrative data (N = 17 m) and health survey information (N = 380 k) from the Netherlands. We estimate five CR models and compare these models with the actual Dutch risk equalization model of 2016 which was estimated by ordinary least squares (OLS). In the CR models, the estimated coefficients are restricted, such that the under-/overcompensation for groups based on self-reported general health is reduced by 20, 40, 60, 80, or 100%. Our results show that CR can improve outcomes for groups that are not explicitly flagged by risk adjuster variables, but worsens outcomes for groups that are explicitly flagged by risk adjuster variables. Using a new standardized metric that summarizes under-/overcompensation for both types of groups, we find that the lighter constraints can lead to better outcomes than OLS.

Examining unpriced risk heterogeneity in the Dutch health insurance market.

A major challenge in regulated health insurance markets is to mitigate risk selection potential. Risk selection can occur in the presence of unpriced risk heterogeneity, which refers to predictable variation in health care spending not reflected in either premiums by insurers or risk equalization payments. This paper examines unpriced risk heterogeneity within risk groups distinguished by the sophisticated Dutch risk equalization model of 2016. Our strategy is to combine the administrative dataset used for estimation of the risk equalization model (n = 16.9 million) with information derived from a large health survey (n = 387k). The survey information allows for explaining and predicting residual spending of the risk equalization model. Based on the predicted residual spending, two metrics are used to indicate unpriced risk heterogeneity at the individual level and at the level of certain (risk) groups: the correlation coefficient between residual spending and predicted residual spending, and the mean absolute value of predicted residual spending. The analyses yield three main findings: (1) the health survey information is able to explain some residual spending of the risk equalization model, (2) unpriced risk heterogeneity exists both in morbidity and in non-morbidity groups, and (3) unpriced risk heterogeneity increases with predicted spending by the risk equalization model. These findings imply that the sophisticated Dutch risk equalization model does not completely remove unpriced risk heterogeneity. Further improvement of the model should focus on broadening and refining the current set of morbidity-based risk adjusters.

Cesarean section in a patient with non-compaction cardiomyopathy managed with ECMO.

Isolated ventricular non-compaction is a rare cardiomyopathy associated with left heart failure, severe arrhythmias and thromboembolism. We report about our interdisciplinary strategy in a patient with severe isolated ventricular non-compaction cardiomyopathy scheduled for caesarean section in general anaesthesia. Monitoring included placement of an arterial line, a central venous catheter and a pulmonary artery catheter with pacing option. Small introducer gates were placed in the femoral artery and vein to facilitate quick percutaneous institution of extracorporeal life support via extracorporeal membrane oxygenation in case of acute cardiac failure refractory to medical treatment. Inotropic pharmacological therapy with 3 µg/kg/min dobutamine and 0.25 mg/kg/min milrinone was started before surgery. Induction of general anesthesia and rapid sequence intubation was performed with an analgesic dose of 0.5 mg/kg S ketamine, 0.25 mg/kg etomidate and 5 mg rocoronium followed by 1.5 mg/kg succinylcholine. This regimen provided completely stable hemodynamics in this critical period until delivery of the child and continuation of anaesthesia with continuous infusion of propofol and remifentanyl. The current strategies, particularly the preparation for femoro-femoral extracorporeal membrane oxygenation, may be considered in similar cases with a high risk of acute cardiac decompensation which may be refractory to medical treatment. Anaesthesiologist involved in performing caesarean section in women with complex cardiac disease, should encompass extracorporeal membrane oxygenation standby in management of the perioperative period.