title: Cream-skimming in deregulated social health insurance: evidence from Switzerland.
abstract: Policymakers fear that health insurers when exposed to competition will engage in cream-skimming (i.e. selection of good risks) rather than trying to improve their benefit to premium ratio. This fear surfaced also when Swiss federal government proposed pro-competitive Law on social health insurance, which barely passed a popular referendum in 1994. While a risk equalization mechanism based on age, gender, and place of residence has already been created, there is a considerable interest in improving its formula. This paper shows that a dummy variable indicating an individual's death during the period of observation causes the coefficient of determination to jump from 0.039 to 0.111. More-over, simulations of the risk selection process suggest that risk equalization should be made a permanent institution rather than being limited to a life of 10 years as prescribed by present legislation. In fact, the formula in use, with all its shortcomings, can be shown to neutralize to a great extent insurer interest in cream skimming provided he takes a longer-run view.
authors.affiliation: CSS, Switzerland.
authors.forename: K
authors.initials: K
authors.lastname: Beck
authors.forename: P
authors.initials: P
authors.lastname: Zweifel
mesh_terms: D000206:Actuarial Analysis; D000367:Age Factors; D019985:Benchmarking; D004465:Economic Competition / Q000331:legislation & jurisprudence; D006302:Health Services Research; D006304:Health Status; D015271:Insurance Pools / Q000191:economics / Q000706:statistics & numerical data; D015273:Insurance Selection Bias; D017059:Models, Econometric; D009313:National Health Programs / Q000191:economics* / Q000331:legislation & jurisprudence / Q000706:statistics & numerical data; D012044:Regression Analysis; D020379:Risk Adjustment; D018570:Risk Assessment; D012737:Sex Factors; D013557:Switzerland; D019472:Universal Health Insurance / Q000191:economics* / Q000331:legislation & jurisprudence