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.

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Keywords Health insurance, Healthcare costs, Risk adjustment, Risk sharing, The Netherlands
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Journal Health Policy
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