Risk selection in the Massachusetts State employee health insurance program.
Using the Diagnostic Cost Group (DCG) model developed from a national sample, we examine biased selection among one fee-for-service (FFS) plan, one preferred provider organization, and several health maintenance organizations (HMOs) in Massachusetts. The proportions of enrollees in low-risk groups are higher in the HMO plans and lower in the FFS plan. The average age in the FFS plan is 9 years greater than that in the HMO plans. Actual premiums are not consistent with risk levels among HMO plans, resulting in gains in some HMO plans and losses in others as high as 20% compared to expected expenses as computed by the DCG model.
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Health Economics Resource Center and Cooperative Studies Program, Veterans Affairs Palo Alto Health Care System, Menlo Park, CA 94025, USA. wei.yu2@med.va.gov
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D003365:Costs and Cost Analysis; D003953:Diagnosis-Related Groups / Q000191:economics; D018588:Fee-for-Service Plans / Q000191:economics / Q000706:statistics & numerical data*; D005249:Fees and Charges; D006264:Health Benefit Plans, Employee / Q000191:economics / Q000706:statistics & numerical data*; D006279:Health Maintenance Organizations / Q000191:economics / Q000706:statistics & numerical data*; D015273:Insurance Selection Bias; D008404:Massachusetts; D015233:Models, Statistical; D020379:Risk Adjustment; D013219:State Government; D014481:United States