Evidence of Selection in a Mandatory Health Insurance Market with Risk Adjustment

29 Pages Posted: 7 Apr 2018

See all articles by Ramsis Croes

Ramsis Croes

Dutch Healthcare Authority; Erasmus University Rotterdam (EUR) - Institute of Health Policy and Management

Katalin Katona

Dutch Healthcare Authority; Tilburg Law and Economics Center (TILEC)

Misja C. Mikkers

Dutch Healthcare Authority; Tilburg Law and Economics Center (TILEC)

Victoria Shestalova

Netherlands Bureau for Economic Policy Analysis

Date Written: April 6, 2018

Abstract

This paper aims to identify selection separately from moral hazard in a mandatory health insurance market where enrollees can freely choose their deductible scheme. The empirical analysis uses a unique data set for the period 2010-2013 covering the whole population of the Netherlands at enrollee level, allowing us to use prior health expenses of the enrollees to demonstrate the selection e ect separately from the potential moral hazard e ect. Our estimates show that the enrollees who opt for deductibles are both healthier and have a higher risk-adjusted result (i.e. the di erence between the compensation from the risk-adjustment fund and the actual health care cost) under the prevailing risk-adjustment system. Compared to enrollees who have chosen the lowest available deductible level, enrollees who have chosen the highest deductible level have an average risk-adjusted result that is approximately AC450 higher per enrollee. An option that the Dutch government could consider to fully eliminate the risk-adjustment gain of the deductibles is to include the choice of a voluntary deductible in the risk-adjustment system as one of the characteristics of the consumer. Our detection of substantial selection e ect of deductibles suggests the need of further research to understand in greater detail the relationship between premium discounts and the expected gains on the risk-adjustment for enrollees with a voluntary deductible.

Keywords: D82, G22, I18

JEL Classification: risk-adjustment,selection, adverse selection, favorable selection, deductibles

Suggested Citation

Croes, Ramsis and Katona, Katalin and Mikkers, Misja C. and Shestalova, Victoria, Evidence of Selection in a Mandatory Health Insurance Market with Risk Adjustment (April 6, 2018). TILEC Discussion Paper No. 2018-013. Available at SSRN: https://ssrn.com/abstract=3157625 or http://dx.doi.org/10.2139/ssrn.3157625

Ramsis Croes

Dutch Healthcare Authority ( email )

Postbus 3017
Utrecht, 3502 GA
Netherlands

Erasmus University Rotterdam (EUR) - Institute of Health Policy and Management ( email )

Netherlands

Katalin Katona

Dutch Healthcare Authority ( email )

Postbus 3017
Utrecht, 3502 GA
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Misja C. Mikkers (Contact Author)

Dutch Healthcare Authority ( email )

Postbus 3017
Utrecht, 3502 GA
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Victoria Shestalova

Netherlands Bureau for Economic Policy Analysis ( email )

2508 GM The Hague
Netherlands

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