Risk sharing between competing health plans and sponsors

Health Affairs

Volumn 20, Issue 3, 2001, Pages 253-262

  Van Barneveld, Erik M ^a   Van Vliet, René C J A ^a   Van De Ven, Wynand P M M ^a  

^a ERASMUS UNIVERSITY ROTTERDAM   (Netherlands)

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; CAPITATION FEE; ECONOMIC ASPECT; HEALTH INSURANCE; HEALTH SERVICES RESEARCH; HUMAN; NETHERLANDS; ORGANIZATION AND MANAGEMENT; PUBLIC HEALTH; REIMBURSEMENT; RISK MANAGEMENT; STATISTICS;

CAPITATION FEE; ECONOMIC COMPETITION; EFFICIENCY, ORGANIZATIONAL; HEALTH SERVICES RESEARCH; HUMANS; INSURANCE, HEALTH; NATIONAL HEALTH PROGRAMS; NETHERLANDS; REIMBURSEMENT, INCENTIVE; RISK SHARING, FINANCIAL;

EID: 0035346520     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.20.3.253     Document Type: Article

References (35)

1. W.P.M.M. van de Ven and R.P. Ellis, "Risk Adjustment in Competitive Health Plan Markets," in Handbook of Health Economics, volume 1, ed. A.J. Culyer and J.P. Newhouse (Amsterdam: Elsevier Science BV, 2000).
2. In this paper we assume these premium rate restrictions. The reason is that they are common, presumably because without them there may arise serious problems with respect to "access to health care coverage for high risks." See W.P.M.M. van de Ven et al., "Access to Coverage for High-Risks in a Competitive Individual Health Insurance Market: Via Premium Rate Restrictions or via Risk-Adjusted Premium Subsidies?" Journal of Health Economics 19, no. 3 (2000): 311-339.
3. See L.M. Lamers, "Risk-Adjusted Capitation Based on the Diagnostic Cost Group Model: An Empirical Evaluation with Health Survey Information," Health Services Research 33, no. 6 (1999): 1727-1744.
4. Risk sharing differs from reinsurance in two ways. Risk sharing is mandatory for all plans and it is not (fully) risk-rated, whereas reinsurance is voluntary and risk-rated. R.R. Bovbjerg, "Reform of Financing for Health Coverage: What Can Reinsurance Accomplish?" Inquiry 29, no. 2 (1992): 158-175.
5. J.P. Newhouse, "Rate Adjusters for Medicare under Capitation," Health Care Financing Review (Annual Supplement 1986): 45-55.
6. J.C. Beebe, "An Outlier Pool for Medicare HMO Payments," Health Care Financing Review 10, no. 1 (1992): 59-63.
7. Long-term care such as nursing home care or care provided by institutions for mentally or physically disabled persons is commonly excluded from capitation payment systems.
8. Because we assume that the health plans are allowed to contract selectively with providers, we also assume that they are allowed to offer different insurance modalities of the specified benefit package. These modalities may differ with respect to the list of contracted health care providers and with respect to the conditions that have to be fulfilled to cover the costs of care.
9. See A.L. Hillman, "Managing the Physician: Rules versus Incentives," Health Affairs (Winter 1991): 138-146; J.P. Weiner and G. de Lissovoy, "A Taxonomy for Managed Care and Health Insurance Plans," Journal of Health Politics, Policy and Law 18, no. 1 (1993): 75-112; A.C. Enthoven, "On the Ideal Market Structure for Third-Party Purchasing of Health Care," Social Science and Medicine 39, no. 10 (1994): 39-57; R.H. Miller, and H.S Luft, "Managed Care Plan Performance since 1980: A Literature Analysis," Journal of the American Medical Association 271, no. 19 (1994): 1512-1519; and M.R. Gold et al, "A National Survey of the Arrangements Managed-Care Plans Make with Physicians," New England Journal of Medicine 311, no. 25 (1995): 1678-1683.
10. See A.L. Hillman, "Managing the Physician: Rules versus Incentives," Health Affairs (Winter 1991): 138-146; J.P. Weiner and G. de Lissovoy, "A Taxonomy for Managed Care and Health Insurance Plans," Journal of Health Politics, Policy and Law 18, no. 1 (1993): 75-112; A.C. Enthoven, "On the Ideal Market Structure for Third-Party Purchasing of Health Care," Social Science and Medicine 39, no. 10 (1994): 39-57; R.H. Miller, and H.S Luft, "Managed Care Plan Performance since 1980: A Literature Analysis," Journal of the American Medical Association 271, no. 19 (1994): 1512-1519; and M.R. Gold et al, "A National Survey of the Arrangements Managed-Care Plans Make with Physicians," New England Journal of Medicine 311, no. 25 (1995): 1678-1683.
11. See A.L. Hillman, "Managing the Physician: Rules versus Incentives," Health Affairs (Winter 1991): 138-146; J.P. Weiner and G. de Lissovoy, "A Taxonomy for Managed Care and Health Insurance Plans," Journal of Health Politics, Policy and Law 18, no. 1 (1993): 75-112; A.C. Enthoven, "On the Ideal Market Structure for Third-Party Purchasing of Health Care," Social Science and Medicine 39, no. 10 (1994): 39-57; R.H. Miller, and H.S Luft, "Managed Care Plan Performance since 1980: A Literature Analysis," Journal of the American Medical Association 271, no. 19 (1994): 1512-1519; and M.R. Gold et al, "A National Survey of the Arrangements Managed-Care Plans Make with Physicians," New England Journal of Medicine 311, no. 25 (1995): 1678-1683.
12. See A.L. Hillman, "Managing the Physician: Rules versus Incentives," Health Affairs (Winter 1991): 138-146; J.P. Weiner and G. de Lissovoy, "A Taxonomy for Managed Care and Health Insurance Plans," Journal of Health Politics, Policy and Law 18, no. 1 (1993): 75-112; A.C. Enthoven, "On the Ideal Market Structure for Third-Party Purchasing of Health Care," Social Science and Medicine 39, no. 10 (1994): 39-57; R.H. Miller, and H.S Luft, "Managed Care Plan Performance since 1980: A Literature Analysis," Journal of the American Medical Association 271, no. 19 (1994): 1512-1519; and M.R. Gold et al, "A National Survey of the Arrangements Managed-Care Plans Make with Physicians," New England Journal of Medicine 311, no. 25 (1995): 1678-1683.
13. See A.L. Hillman, "Managing the Physician: Rules versus Incentives," Health Affairs (Winter 1991): 138-146; J.P. Weiner and G. de Lissovoy, "A Taxonomy for Managed Care and Health Insurance Plans," Journal of Health Politics, Policy and Law 18, no. 1 (1993): 75-112; A.C. Enthoven, "On the Ideal Market Structure for Third-Party Purchasing of Health Care," Social Science and Medicine 39, no. 10 (1994): 39-57; R.H. Miller, and H.S Luft, "Managed Care Plan Performance since 1980: A Literature Analysis," Journal of the American Medical Association 271, no. 19 (1994): 1512-1519; and M.R. Gold et al, "A National Survey of the Arrangements Managed-Care Plans Make with Physicians," New England Journal of Medicine 311, no. 25 (1995): 1678-1683.
14. R.K. Khandker and W.G. Manning, "The Impact of Utilization Review on Costs and Utilization," in Health Economics Worldwide, ed. P. Zweifel and H.E. French III (Dordrecht: Kluwer Academic Publishers, 1992); A.C. Enthoven and S.J. Singer, "Managed Competition and California's Health Care Economy," Health Affairs (Spring 1996): 39-57; and W.L. Armstrong, "The Benefits That Disease Management Could Bring to UK Health Care," Journal of Managed Care 1 (1997): 4-8.
15. R.K. Khandker and W.G. Manning, "The Impact of Utilization Review on Costs and Utilization," in Health Economics Worldwide, ed. P. Zweifel and H.E. French III (Dordrecht: Kluwer Academic Publishers, 1992); A.C. Enthoven and S.J. Singer, "Managed Competition and California's Health Care Economy," Health Affairs (Spring 1996): 39-57; and W.L. Armstrong, "The Benefits That Disease Management Could Bring to UK Health Care," Journal of Managed Care 1 (1997): 4-8.
16. R.K. Khandker and W.G. Manning, "The Impact of Utilization Review on Costs and Utilization," in Health Economics Worldwide, ed. P. Zweifel and H.E. French III (Dordrecht: Kluwer Academic Publishers, 1992); A.C. Enthoven and S.J. Singer, "Managed Competition and California's Health Care Economy," Health Affairs (Spring 1996): 39-57; and W.L. Armstrong, "The Benefits That Disease Management Could Bring to UK Health Care," Journal of Managed Care 1 (1997): 4-8.
17. H.S. Luft and R.M. Miller, "Patient Selection in a Competitive Health Care System," Health Affairs (Fall 1988): 98-119; and J.P. Newhouse, "Patients at Risk: Health Reform and Risk Adjustment," Health Affairs (Spring 1994): 132-146.
18. H.S. Luft and R.M. Miller, "Patient Selection in a Competitive Health Care System," Health Affairs (Fall 1988): 98-119; and J.P. Newhouse, "Patients at Risk: Health Reform and Risk Adjustment," Health Affairs (Spring 1994): 132-146.
19. W.P.M.M van de Ven and R.C.J.A. van Vliet, "How Can We Prevent Cream Skimming in a Competitive Health Insurance Market? The Great Challenge for the 1990s," in Health Economics Worldwide, 23-46.
20. Suggestions for forms of risk sharing have been given in the following papers: L. Gruenberg, S.S. Wallack, and C.P. Tompkins, "Pricing Strategies for Capitated Delivery Systems," Health Care Financing Review (Annual Supplement 1986): 35-44; Newhouse, "Rate Adjusters for Medicare"; S.S. Wallack, C.P. Tompkins, and L. Gruenberg, "A Plan for Rewarding Efficient HMOs," Health Affairs (Fall 1988): 80-97; van de Ven and van Vliet, "How Can We Prevent"; and W.P.M.M. van de Ven et al., "Risk-Adjusted Capitation: Recent Experiences in the Netherlands," Health Affairs (1994): 118-136. Empirical results for two forms of risk sharing are available in Beebe, "An Outlier Pool"; and E.M. van Barneveld, R.C.J.A. van Vliet, and W.P.M.M. van de Ven, "Mandatory High-Risk Pooling: A Means for Reducing Incentives for Cream Skimming," Inquiry 33, no. 2 (1996): 133-143.
21. Suggestions for forms of risk sharing have been given in the following papers: L. Gruenberg, S.S. Wallack, and C.P. Tompkins, "Pricing Strategies for Capitated Delivery Systems," Health Care Financing Review (Annual Supplement 1986): 35-44; Newhouse, "Rate Adjusters for Medicare"; S.S. Wallack, C.P. Tompkins, and L. Gruenberg, "A Plan for Rewarding Efficient HMOs," Health Affairs (Fall 1988): 80-97; van de Ven and van Vliet, "How Can We Prevent"; and W.P.M.M. van de Ven et al., "Risk-Adjusted Capitation: Recent Experiences in the Netherlands," Health Affairs (1994): 118-136. Empirical results for two forms of risk sharing are available in Beebe, "An Outlier Pool"; and E.M. van Barneveld, R.C.J.A. van Vliet, and W.P.M.M. van de Ven, "Mandatory High-Risk Pooling: A Means for Reducing Incentives for Cream Skimming," Inquiry 33, no. 2 (1996): 133-143.
22. Suggestions for forms of risk sharing have been given in the following papers: L. Gruenberg, S.S. Wallack, and C.P. Tompkins, "Pricing Strategies for Capitated Delivery Systems," Health Care Financing Review (Annual Supplement 1986): 35-44; Newhouse, "Rate Adjusters for Medicare"; S.S. Wallack, C.P. Tompkins, and L. Gruenberg, "A Plan for Rewarding Efficient HMOs," Health Affairs (Fall 1988): 80-97; van de Ven and van Vliet, "How Can We Prevent"; and W.P.M.M. van de Ven et al., "Risk-Adjusted Capitation: Recent Experiences in the Netherlands," Health Affairs (1994): 118-136. Empirical results for two forms of risk sharing are available in Beebe, "An Outlier Pool"; and E.M. van Barneveld, R.C.J.A. van Vliet, and W.P.M.M. van de Ven, "Mandatory High-Risk Pooling: A Means for Reducing Incentives for Cream Skimming," Inquiry 33, no. 2 (1996): 133-143.
23. Suggestions for forms of risk sharing have been given in the following papers: L. Gruenberg, S.S. Wallack, and C.P. Tompkins, "Pricing Strategies for Capitated Delivery Systems," Health Care Financing Review (Annual Supplement 1986): 35-44; Newhouse, "Rate Adjusters for Medicare"; S.S. Wallack, C.P. Tompkins, and L. Gruenberg, "A Plan for Rewarding Efficient HMOs," Health Affairs (Fall 1988): 80-97; van de Ven and van Vliet, "How Can We Prevent"; and W.P.M.M. van de Ven et al., "Risk-Adjusted Capitation: Recent Experiences in the Netherlands," Health Affairs (1994): 118-136. Empirical results for two forms of risk sharing are available in Beebe, "An Outlier Pool"; and E.M. van Barneveld, R.C.J.A. van Vliet, and W.P.M.M. van de Ven, "Mandatory High-Risk Pooling: A Means for Reducing Incentives for Cream Skimming," Inquiry 33, no. 2 (1996): 133-143.
24. Suggestions for forms of risk sharing have been given in the following papers: L. Gruenberg, S.S. Wallack, and C.P. Tompkins, "Pricing Strategies for Capitated Delivery Systems," Health Care Financing Review (Annual Supplement 1986): 35-44; Newhouse, "Rate Adjusters for Medicare"; S.S. Wallack, C.P. Tompkins, and L. Gruenberg, "A Plan for Rewarding Efficient HMOs," Health Affairs (Fall 1988): 80-97; van de Ven and van Vliet, "How Can We Prevent"; and W.P.M.M. van de Ven et al., "Risk-Adjusted Capitation: Recent Experiences in the Netherlands," Health Affairs (1994): 118-136. Empirical results for two forms of risk sharing are available in Beebe, "An Outlier Pool"; and E.M. van Barneveld, R.C.J.A. van Vliet, and W.P.M.M. van de Ven, "Mandatory High-Risk Pooling: A Means for Reducing Incentives for Cream Skimming," Inquiry 33, no. 2 (1996): 133-143.
25. Suggestions for forms of risk sharing have been given in the following papers: L. Gruenberg, S.S. Wallack, and C.P. Tompkins, "Pricing Strategies for Capitated Delivery Systems," Health Care Financing Review (Annual Supplement 1986): 35-44; Newhouse, "Rate Adjusters for Medicare"; S.S. Wallack, C.P. Tompkins, and L. Gruenberg, "A Plan for Rewarding Efficient HMOs," Health Affairs (Fall 1988): 80-97; van de Ven and van Vliet, "How Can We Prevent"; and W.P.M.M. van de Ven et al., "Risk-Adjusted Capitation: Recent Experiences in the Netherlands," Health Affairs (1994): 118-136. Empirical results for two forms of risk sharing are available in Beebe, "An Outlier Pool"; and E.M. van Barneveld, R.C.J.A. van Vliet, and W.P.M.M. van de Ven, "Mandatory High-Risk Pooling: A Means for Reducing Incentives for Cream Skimming," Inquiry 33, no. 2 (1996): 133-143.
26. Suggestions for forms of risk sharing have been given in the following papers: L. Gruenberg, S.S. Wallack, and C.P. Tompkins, "Pricing Strategies for Capitated Delivery Systems," Health Care Financing Review (Annual Supplement 1986): 35-44; Newhouse, "Rate Adjusters for Medicare"; S.S. Wallack, C.P. Tompkins, and L. Gruenberg, "A Plan for Rewarding Efficient HMOs," Health Affairs (Fall 1988): 80-97; van de Ven and van Vliet, "How Can We Prevent"; and W.P.M.M. van de Ven et al., "Risk-Adjusted Capitation: Recent Experiences in the Netherlands," Health Affairs (1994): 118-136. Empirical results for two forms of risk sharing are available in Beebe, "An Outlier Pool"; and E.M. van Barneveld, R.C.J.A. van Vliet, and W.P.M.M. van de Ven, "Mandatory High-Risk Pooling: A Means for Reducing Incentives for Cream Skimming," Inquiry 33, no. 2 (1996): 133-143.
27. In our empirical analyses, we financed the risk sharing via a proportional reduction of the normative costs that constitute the basis for the calculation of the capitation payments. See also E.M. van Barneveld, "Risk Sharing as a Supplement to Imperfect Capitation: A Tradeoff between Selection and Efficiency," Journal of Health Economics 20, no. 2 (2001): 147-168.
28. This question is addressed in chapter 8 of E.M. van Barneveld, "Risk Sharing as a Supplement to Imperfect Capitation in Health Insurance: A Tradeoff between Selection and Efficiency" (Doctoral thesis, Erasmus University, Rotterdam, the Netherlands, 2000).
29. L.M. Lamers, "Capitation Payments to Competing Dutch Sickness Funds" (Doctoral thesis, Erasmus University, Rotterdam, the Netherlands, 1997).
30. In January 2001 one U.S. dollar was worth about 1.06 Euro and about 2.34 Dutch guilders.
31. Beebe, "An Outlier Pool."
32. Ibid.; Newhouse et al., "Risk Adjustment and Medicare"; and E.B. Keeler, G.M. Carter, and J.P. Newhouse, "A Model of the Impact of Reimbursement Schemes on Health Plan Choice," Journal of Health Economics 17, no. 3 (1998): 297-320.
33. Ibid.; Newhouse et al., "Risk Adjustment and Medicare"; and E.B. Keeler, G.M. Carter, and J.P. Newhouse, "A Model of the Impact of Reimbursement Schemes on Health Plan Choice," Journal of Health Economics 17, no. 3 (1998): 297-320.
34. Ibid.; Newhouse et al., "Risk Adjustment and Medicare"; and E.B. Keeler, G.M. Carter, and J.P. Newhouse, "A Model of the Impact of Reimbursement Schemes on Health Plan Choice," Journal of Health Economics 17, no. 3 (1998): 297-320.
35. In Israel some form of condition-specific risk sharing is being employed as a supplement to demographic capitation payments. This form of risk sharing covers five severe diseases and about 6 percent of overall expenditures.