EconPapers    
Economics at your fingertips  
 

Marketplace Plan Payment Options for Dealing with High-Cost Enrollees

Timothy Layton () and Thomas G. McGuire
Additional contact information
Thomas G. McGuire: Department of Health Care Policy, Harvard Medical School

American Journal of Health Economics, 2017, vol. 3, issue 2, 165-191

Abstract: Two of the three elements of the ACA's "premium stabilization program," reinsurance and risk corridors, are set to expire in 2017, leaving risk adjustment alone to protect plans against risk of high-cost cases. This paper considers potential modifications of the HHS risk adjustment methodology to maintain plan protection against risk from high-cost cases within the current regulatory framework. We show analytically that modifications of the transfer formula and of the risk adjustment model itself are mathematically equivalent to a conventional actuarially fair reinsurance policy. Furthermore, closely related modifications of the transfer formula or the risk adjustment model can improve on conventional reinsurance by figuring transfers or estimating risk adjustment model weights recognizing the presence of a reinsurance function. In the empirical section, we estimate risk adjustment models with an updated and selected version of the data used to calibrate the federal payment models, and show, using simulation methods, that proposed modifications improve fit at the person level and protect small insurers against high-cost risk better than conventional reinsurance. We simulate various "attachment points" for the reinsurance equivalent policies and quantify the trade-offs of higher and lower attachment points.

Keywords: health insurance; marketplaces; reinsurance; risk adjustment (search for similar items in EconPapers)
JEL-codes: I11 I13 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.journals.uchicago.edu/doi/pdf/10.1162/AJHE_a_00071 (application/pdf)
Access to PDF is restricted to subscribers.

Related works:
Journal Article: Marketplace Plan Payment Options for Dealing with High-Cost Enrollees (2017) Downloads
Working Paper: Marketplace Plan Payment Options for Dealing with High-Cost Enrollees (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:amjhec:v:3:y:2017:i:2:p:165-191

Access Statistics for this article

More articles in American Journal of Health Economics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

 
Page updated 2019-12-24
Handle: RePEc:ucp:amjhec:v:3:y:2017:i:2:p:165-191