Background Worldwide, risk-equalization (RE) models in competitive health insurance markets have evolved from simple demographic models to sophisticated models containing diagnosis and pharmacy-based indicators of health. However, these models still have important imperfections; adding information on (diagnoses of) physiotherapy treatment may further improve RE-models. Therefore, a new risk-adjuster based on physiotherapy costs in the prior year was introduced in the Dutch RE-model of 2016.

Methods Physiotherapy claims-data (2012) and administrative data on costs and risk-characteristics (2013) for 94% of the Dutch population (N = 15.8 million) are used to evaluate the current risk-adjuster based on physiotherapy costs and to assess the effects of replacing it by different modalities of a risk-adjuster based on physiotherapy diagnoses. Of the 89 diagnoses in the claims-data, 62 are dropped because they relate to temporary health problems. The 27 retained diagnoses are added to the Dutch model in 4 modalities: 27 separate risk-classes, 9 diagnosis-clusters based on main pathology category, 4 diagnosis-clusters based on residual costs, and the 4 clusters of modality 3 interacted with age.

Results Although the cost-based risk-adjuster improves the model’s predictive power and removes the average undercompensation (€919) for enrollees with physiotherapy costs in the prior year, it is outperformed by all 4 diagnosis-based modalities. Of these modalities, modality 3 is preferred based on its simplicity and comparable predictive power.

Conclusions Adding information on physiotherapy can further improve the performance of sophisticated RE-models. Regarding the Dutch model, a risk-adjuster containing 4 risk-classes for clustered diagnoses based on residual costs is the preferred modality.

Additional Metadata
Keywords Health insurance, Risk equalization, Physiotherapy diagnoses, Claims data
JEL Analysis of Health Care Markets (jel I11), Insurance; Insurance Companies (jel G22), Health Insurance, Public and Private (jel I13)
Persistent URL,
Journal The European Journal of Health Economics
Note The online version of this article (doi:10.1007/s10198-017-0874-x) contains supplementary material, which is available to authorized users.
Eijkenaar, F, & van Vliet, R.C.J.A. (2017). Improving risk equalization using information on physiotherapy diagnoses. The European Journal of Health Economics, 1–9. doi:10.1007/s10198-017-0874-x