The Power of Reinsurance in Health Insurance Exchanges to Improve the Fit of the Payment System and Reduce Incentives for Adverse Selection

This article assesses the power of reinsurance in the context of other plan payment features, including prospective and concurrent risk adjustment. Using data from the Medicare Expenditure Panel Survey (MEPS) to draw an "Exchange population," we simulate the contribution of reinsurance to improving the fit of the payment system to plan costs and to mitigating incentives for adverse selection for groups of enrollees with selected chronic illnesses. Modest reductions in attachment points equate the payment-system fit of retrospective to concurrent risk adjustment. Reinsurance is very powerful in fitting payments to costs and moderately effective in dealing with selection incentives.

Source: Inquiry: The Journal of Health Care Organization, Provision, and Financing - November 1, 2013 Category: Health Management Authors: Zhu, J. M., Layton, T., Sinaiko, A. D., McGuire, T. G. Tags: Research Papers Source Type: research