Background: Risk-equalization (RE) models in competitive health insurance markets have become increasingly sophisticated. However, these models still have important imperfections. A specific problem in the Netherlands is that insurers are insufficiently compensated for individuals who can persistently be found in the right-end tail of the cost distribution. Objectives: The goal of this study is to explore and evaluate options for improving compensation for persistently high-cost individuals in the Dutch basic health insurance. Methods: Prescription drugs claims (2012) and administrative data on costs and risk-characteristics (2010-2013) for the entire Dutch population are used to identify high-cost individuals and evaluate improvement options. These options - including new risk-classes and a form of risk-sharing - are evaluated in terms of insurers' incentives for risk-selection and efficiency. Results: Three significantly undercompensated high-cost groups are identified: users of specific expensive drugs for rare diseases, hemophilia-patients, and individuals whose costs are in the top-0.50% in 3 prior years. The improvement options effectively remove the undercompensations for these groups and lead to a considerable improvement in individual-level model fit. However, the options differ in terms of their (potential) effects on insurers' efficiency incentives. Conclusions: Although this study provides useful insights in the possibilities for improving RE-models for persistently high-cost individuals, improving compensation remains challenging and dependent on the ongoing debate regarding coverage and reimbursement of expensive drugs.

Additional Metadata
Keywords Health insurance, Healthcare costs, Risk adjustment, Risk sharing, The Netherlands
Persistent URL dx.doi.org/10.1016/j.healthpol.2017.09.007, hdl.handle.net/1765/102053
Journal Health Policy
Citation
Eijkenaar, F, & van Vliet, R.C.J.A. (2017). Improving risk equalization for individuals with persistently high costs: Experiences from the Netherlands. Health Policy. doi:10.1016/j.healthpol.2017.09.007