Adverse Selection and Risk Rating in Insurance Markets: Final Report and Executive Summary

摘要

The study used demographic, personnel, fee-for-service (FFS) claims, and Health Maintenance Organization (HMO) utilization data from a large private firm to evaluate risk selection among competing health plans and to develop a method for adjusting capitation payments to compensate for selection. The FFS plan and large group-model HMO experienced enrollee risk similar to the employee population as a whole. The smaller and newer network and independent practice HMOs exhibited both very favorable and very adverse risk selection. The study develops a method for evaluating the ability of risk-adjustment models to predict expenditures for employees groups enrolled in different health plans, as distinct from the conventional emphasis on predicting risk for individual employees. The four-equation statistical model explains 61% of the variance in per capita expenditures across groups with different risk levels.