Risk selection threatens quality of care for certain patients: Lessons from Europe's health insurance exchanges

Experience in European health insurance exchanges indicates that even with the best risk-adjustment formulas, insurers have substantial incentives to engage in risk selection. The potentially most worrisome form of risk selection is skimping on the quality of care for underpriced high-cost patients-that is, patients for whom insurers are compensated at a rate lower than the predicted health care expenses of these patients. In this article we draw lessons for the United States from twenty years of experience with health insurance exchanges in Europe, where risk selection is a serious problem. Mistakes by European legislators and inadequate evaluation criteria for risk selection incentives are discussed, as well as strategies to reduce risk selection and the complex trade-offamong selection (through quality skimping), efficiency, and affordability. Recommended improvements to the risk-adjustment process in the United States include considering the adoption of risk adjusters used in Europe, investing in the collection of data, using a permanent form of risk sharing, and replacing the current premium "band" restrictions with more flexible restrictions. Policy makers need to understand the complexities of regulating competitive health insurance markets and to prevent risk selection that threatens the provision of good-quality care for underpriced high-cost patients.

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