Integrating risk adjustment and enrollee premiums in health plan payment

Thomas G. McGuire, Jacob Glazer, Joseph P. Newhouse, Sharon Lise Normand, Julie Shi, Anna D. Sinaiko, Samuel H. Zuvekas

Research output: Contribution to journalArticlepeer-review

Abstract

In two important health policy contexts - private plans in Medicare and the new state-run "Exchanges" created as part of the Affordable Care Act (ACA) - plan payments come from two sources: risk-adjusted payments from a Regulator and premiums charged to individual enrollees. This paper derives principles for integrating risk-adjusted payments and premium policy in individual health insurance markets based on fitting total plan payments to health plan costs per person as closely as possible. A least squares regression including both health status and variables used in premiums reveals the weights a Regulator should put on risk adjusters when markets determine premiums. We apply the methods to an Exchange-eligible population drawn from the Medical Expenditure Panel Survey (MEPS).

Original languageEnglish
Pages (from-to)1263-1277
Number of pages15
JournalJournal of Health Economics
Volume32
Issue number6
DOIs
StatePublished - Dec 2013

Keywords

  • Exchanges
  • Health insurance
  • I13
  • I18
  • Medicare
  • Premiums
  • Risk adjustment

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