TY  - JOUR
AU  - McGuire, Thomas G
AU  - Schillo, Sonja
AU  - van Kleef, Richard C
TI  - Reinsurance, Repayments, and Risk Adjustment in Individual Health Insurance: Germany, The Netherlands and the U.S. Marketplaces
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 25374
PY  - 2018
Y2  - December 2018
DO  - 10.3386/w25374
UR  - http://www.nber.org/papers/w25374
L1  - http://www.nber.org/papers/w25374.pdf
N1  - Author contact info:
Thomas McGuire
Department of Health Care Policy
Harvard Medical School
180 Longwood Avenue
Boston, MA 02115
Tel: 617/432-3536
E-Mail: mcguire@hcp.med.harvard.edu

Sonja Schillo
Institute for Healthcare Management and Research
CINCH - Health Economics Research Center 
Weststadttürme Berliner Platz 6-8
45127 Essen
Germany
E-Mail: Sonja.Schillo@uni-due.de

Richard C. van Kleef
Institute of Health Policy and Management 
Erasmus University Rotterdam
PO Box 1738
3000 DR Rotterdam
The Netherlands
E-Mail: vankleef@bmg.eur.nl
AB  - Reinsurance can complement risk adjustment of health plan payments to improve fit of payments to plan spending at the individual and group level.  This paper proposes three improvements in health plan payment systems using reinsurance.  First, we base reinsurance payments on spending not accounted for by the risk adjustment system, rather than just high spending.  Second, we propose pairing reinsurance for individual-level losses with repayments for individual-level profits. Third, we optimize the weights on the risk adjustors taking account of the presence of reinsurance/repayment. We implement our methodology in data from Germany, The Netherlands and the U.S. Marketplaces, comparing our modified approach to plan payment with risk adjustment as currently practiced in the three settings.  The combination of the three improvements yields very substantial improvements in the individual-level fit of payments to plan spending in all three countries.
ER  -