Risk sharing as a supplement to imperfect capitation: a tradeoff between selection and efficiency.
This paper describes forms of risk sharing between insurers and the regulator in a competitive individual health insurance market with imperfectly risk-adjusted capitation payments. Risk sharing implies a reduction of an insurer's incentives for selection as well as for efficiency. In a theoretical analysis, we show how the optimal extent of risk sharing may depend on the weights the regulator assigns to these effects. Some countries employ outlier or proportional risk sharing as a supplement to demographic capitation payments. Our empirical results strongly suggest that other forms of risk sharing yield better tradeoffs between selection and efficiency.
Department of Health Policy and Management, Erasmus University Rotterdam, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands. e.van.barneveld@agis-groep.nl
E M
EM
van Barneveld
L M
LM
Lamers
R C
RC
van Vliet
W P
WP
van de Ven
D002204:Capitation Fee; D003363:Cost Control / Q000706:statistics & numerical data; D003710:Demography; D017598:Efficiency, Organizational; D006801:Humans; D015273:Insurance Selection Bias; D018854:Managed Competition / Q000191:economics* / Q000458:organization & administration; D017059:Models, Econometric; D009426:Netherlands; D020379:Risk Adjustment; D020414:Risk Sharing, Financial / Q000191:economics / Q000379:methods*