Scope and Incentives for Risk Selection in Health Insurance Markets With Regulated Competition: A Conceptual Framework and International Comparison.

In health insurance markets with regulated competition, regulators face the challenge of preventing risk selection. This paper provides a framework for analyzing the scope (i.e., potential actions by insurers and consumers) and incentives for risk selection in such markets. Our approach consists of three steps. First, we describe four types of risk selection: (a) selection by consumers in and out of the market, (b) selection by consumers between high- and low-value plans, (c) selection by insurers via plan design, and (d) selection by insurers via other channels such as marketing, customer service, and supplementary insurance. In a second step, we develop a conceptual framework of how regulation and features of health insurance markets affect the scope and incentives for risk selection along these four dimensions. In a third step, we use this framework to compare nine health insurance markets with regulated competition in Australia, Europe, Israel, and the United States.

The goal of risk equalization in regulated competitive health insurance markets.

Different opinions exist about the goal of risk equalization in regulated competitive health insurance markets. There seems to be consensus that an element of the goal of risk equalization is 'to remove the predictable over- and undercompensations of subgroups of insured' or, equivalently, 'to achieve a level playing field for each risk composition of an insurer's portfolio' or, equivalently, 'to remove the incentives for risk selection'. However, the role of efficiency appears to be a major issue: should efficiency also be an element of the goal of risk equalization, or should it be a restriction to the goal, or should efficiency not be an element of the goal or a restriction to the goal? If efficiency plays a role, a comprehensive analysis of the total effect of risk equalization on efficiency needs to be done. An improvement of the performance of a risk equalization scheme has both negative and positive effects on efficiency. Negative effects include the reduction in efficiency via cost- or utilization-based risk adjusters. Positive effects result from leveling the playing field and reducing the incentives for risk selection, which increase efficiency as the outcome of a competitive market. In practice many regulators and policy makers take efficiency into consideration by looking at the negative effects, but hardly at the positive effects. The definition of the goal of risk equalization has consequences for the design and evaluation of risk equalization schemes and for the equalization payments. We describe relevant potential goals, tradeoffs and possible solutions.

How the COVID-19 pandemic can distort risk adjustment of health plan payment.

The COVID-19 pandemic has led to disruptions in healthcare utilization and spending. While some changes might persist (e.g. substitution of specialist visits by online consultations), others will be transitory (e.g. fewer surgical procedures due to cancellation of treatments). This paper discusses the implications of transitory changes in healthcare utilization and spending for risk adjustment of health plan payment. In practice, risk adjustment methodologies typically consist of two steps: (1) calibration of payment weights for a given set of risk adjusters and (2) calculation of payments to insurers by combining the calibrated weights with enrollee characteristics. In this paper, we first introduce a simple conceptual framework for analyzing the (potential) distortions from the pandemic for both steps and then provide a hypothetical illustration of how these distortions can lead to under- or overpayment of insurers. The size of these under-/overpayments depends on (1) the impact of the pandemic on patterns in utilization and spending, (2) the distribution of risk types across insurers, (3) the extent to which insurers are disproportionately affected by the pandemic, and (4) features of the risk adjustment system.

Higher education delays and shortens cognitive impairment: a multistate life table analysis of the US Health and Retirement Study.

Improved health may extend or shorten the duration of cognitive impairment by postponing incidence or death. We assess the duration of cognitive impairment in the US Health and Retirement Study (1992-2004) by self reported BMI, smoking and levels of education in men and women and three ethnic groups. We define multistate life tables by the transition rates to cognitive impairment, recovery and death and estimate Cox proportional hazard ratios for the studied determinants. 95% confidence intervals are obtained by bootstrapping. 55 year old white men and women expect to live 25.4 and 30.0 years, of which 1.7 [95% confidence intervals 1.5; 1.9] years and 2.7 [2.4; 2.9] years with cognitive impairment. Both black men and women live 3.7 [2.9; 4.5] years longer with cognitive impairment than whites, Hispanic men and women 3.2 [1.9; 4.6] and 5.8 [4.2; 7.5] years. BMI makes no difference. Smoking decreases the duration of cognitive impairment with 0.8 [0.4; 1.3] years by high mortality. Highly educated men and women live longer, but 1.6 years [1.1; 2.2] and 1.9 years [1.6; 2.6] shorter with cognitive impairment than lowly educated men and women. The effect of education is more pronounced among ethnic minorities. Higher life expectancy goes together with a longer period of cognitive impairment, but not for higher levels of education: that extends life in good cognitive health but shortens the period of cognitive impairment. The increased duration of cognitive impairment in minority ethnic groups needs further study, also in Europe.

Smoking kills, obesity disables: a multistate approach of the US Health and Retirement Survey.

Increasing BMI causes concerns about the consequences for health care. Decreasing cardiovascular mortality has lowered obesity-related mortality, extending duration of disability. We hypothesized increased duration of disability among overweight and obese individuals. We estimated age-, risk-, and state-dependent probabilities of activities of daily living (ADL) disability and death and calculated multistate life tables, resulting in the comprehensive measure of life years with and without ADL disability. We used prospective data of 16,176 white adults of the Health and Retirement Survey (HRS). Exposures were self-reported BMI and for comparison smoking status and levels of education. Outcomes were years to live with and without ADL disability at age 55. The reference categories were high normal weight (BMI: 23-24.9), nonsmoking and high education. Mild obesity (BMI: 30-34.9) did not change total life expectancy (LE) but exchanged disabled for disability-free years. Mild obesity decreased disability-free LE with 2.7 (95% confidence limits 1.2; 3.2) year but increased LE with disability with 2.0 (0.6; 3.4) years among men. Among women, BMI of 30 to 34.9 decreased disability-free LE with 3.6 (2.1; 5.1) year but increased LE with disability with 3.2 (1.6;4.8) years. Overweight (BMI: 25-29.9) increases LE with disability for women only, by 2.1 (0.8; 3.3) years). Smoking compressed disability by high mortality. Smoking decreased LE with 7.2 years, and LE with disability with 1.3 (0.5; 2.5) years (men) and 1.4 (0.3; 2.6) years (women). A lower education decreased disability-free life, but not duration of ADL disability. In the aging baby boom, higher BMI will further increase care dependence.

The burden of mortality of obesity at middle and old age is small. A life table analysis of the US Health and Retirement Survey.

The evidence of effect of overweight and obesity on mortality at middle and old age is conflicting. The increased relative risk of cardiovascular disease and diabetes for overweight and obese individuals compared to normal weight is well documented, but the absolute risk of cardiovascular death has decreased spectacularly since the 1980s. We estimate the burden of mortality of obesity among middle and old aged adults in the Health and Retirement Survey (HRS), a US prospective longitudinal study. We calculate univariate and multivariate age-specific probabilities and proportional hazard ratios of death in relation to self-reported body mass index (BMI), smoking and education. The life table translates age specific adjusted event rates in survival times, dependent on risk factor distributions (smoking, levels of education and self reported BMI). 95% confidence intervals are calculated by bootstrapping. The highest life expectancy at age 55 was found in overweight (BMI 25-29.9), highly educated non smokers: 30.7 (29.5-31.9) years (men) and 33.2 (32.1-34.3) (women), slightly higher than a BMI 23-24.9 in both sexes. Smoking decreased the population life expectancy with 3.5 (2.7-4.4) years (men) and 1.8 (1.0-2.5) years (women). Less than optimal education cost men and women respectively 2.8 (2.1-3.6) and 2.6 (1.6-3.6) years. Obesity and low normal weight decreased population life expectancy respectively by 0.8 (0.2-1.3) and 0.8 (0.0-1.5) years for men and women in a contemporary, US population. The burden of mortality of obesity is limited, compared to smoking and low education.

What drives donor funding in population assistance programs? Evidence from OECD countries.

The 1994 International Conference on Population and Development (ICPD) established goals for the expansion of population assistance. To date, the financial promises made by donor countries in 1994 have not been met. To unravel the gap between ambitions and contributions, we use panel estimation methods to see what lies behind the level of donor contributions and the sharing of burdens across the various categories of population and HIV/AIDS assistance in 21 donor countries for the years 1996-2002. Contributions by donors depend heavily on the economic wealth and subjective preferences of donor countries. The sharing of the ICPD burden within the group of OECD/DAC countries is in line with the countries' ability to pay, although within the aggregate we observe a specialization in channels for aid: small countries predominantly use multilateral aid agencies, whereas large countries rely more on bilateral aid channels. Catholic countries are averse to donating unrestricted funds (flowing primarily to multilateral agencies) or restricted funds targeted at family planning programs.