ARM Orlando 03Jun07
Annual Research Meeting (ARM)
Health Insurance Act: 01jan06
Evaluation of the Dutch Risk
Equalization system: are the insurers
confronted with predictable losses
for the chronically ill?
Wynand P.M.M. van de Ven
(vandeven@bmg.eur.nl)
Pieter J.A. Stam
Rene C.J.A. Van Vliet
Erasmus University Rotterdam
Erasmus University Rotterdam
AcademyHealth, Orlando, 03Jun07
Erasmus University Rotterdam
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ARM Orlando 03Jun07
ARM Orlando 03Jun07
Risk Equalization Fund (REF)
REF
Income-related
contribution
50%
50%
Insured
REF-payment based
on risk adjusters
Insurer
premium (18+)
Two thirds of all households receive an income-related care allowance
(at most € 420 per person per year)
ARM Orlando 03Jun07
• High premiums for high-risk patients;
• Instability in the insurance market.
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(13 PCGs and about 7% of population)
2004 Diagnostic Cost Groups (DCGs) (about 2% of pop)
yes/no self-employed
2007 Multiple PCGs allowed (co-morbidity);
New PCGs: mental health (3% pop.), cancer
and growth hormons
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Objective & Research questions
Erasmus University Rotterdam
Erasmus University Rotterdam
• Selection more profitable than efficiency;
New risk adjuster
Age/gender
Region, yes/no employee, disability
Age/disability
Pharmacy-based Cost Groups (PCGs)
ARM Orlando 03Jun07
Effects of selection
• Disincentive for providers to acquire the
best reputation for treating chronic diseases;
Year
1992
1995
1997
2002
(20 PCGs and about 16% of population)
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• Disincentive for insurers to be responsive to
the high-risk consumers and contract the
best quality care for them;
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Risk adjusters in the Dutch REF
Erasmus University Rotterdam
Erasmus University Rotterdam
Gov’t contribution
(18-)
• Mandate for everyone in the Netherlands
to buy private health insurance;
• Standard benefits package;
• Selective contracting allowed;
• Open enrolment per product per insurer;
• Community rating per product per
insurer per province;
• Risk equalization.
Objective: evaluate the risk equalization system.
Research questions:
1. Are there identifiable subgroups of consumers
with predictable lossses?
2. If so: How large are these subgroups? And
how large are the predictable losses?
In particular we focus on subgroups of
persons with a chronic condition or with
above average utilization rates in previous
years.
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Results (costs and losses in euro)
• Data: all information in the files of a large
insurer (Agis) over the period 1998 – 2004,
combined with an individual health survey
(held in 2001); some 30,000 observations.
• Method: the Dutch 2007 risk adjusters are
applied to the 2004-data. By comparing the
predicted 2004-expenditures (based on the
2007 risk adjusters) with their actual 2004expenditures we calculated the average profits
and losses for many subgroups.
ARM Orlando 03Jun07
Subgroup 2001
Erasmus University Rotterdam
Erasmus University Rotterdam
Method
7
Costs
2004
Predictable
losses 2004
High bloodpressure
15.2%
2961
342
8.1%
3182
460
22.3%
2848
333
7 or more self-reported conditions
2.9%
4833
1461
Prescribed drugs (self reported, 2
weeks)
48.2%
2597
220
Contact specialist (self reported, 1 year)
39.8%
2586
317
7.5%
3611
1034
2.2%
4258
1152
Hospitalization (self reported, 1 year)
Home care (self reported, 1 year)
ARM Orlando 03Jun07
Erasmus University Rotterdam
Erasmus University Rotterdam
Size
3-6 self-reported conditions
9
541
4469
1140
Worst score Social functioning (SF-36)
10.0%
3190
649
Restricted in mobility (OECD-score)
14.9%
3740
653
Stroke, brain haemorrhage/ infarction
2.6%
4341
943
Myocardial infarction
3.3%
4755
789
Other serious heart disease
2.3%
4654
926
Some type of (malignant) cancer
4.8%
3440
689
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Subgroup 1997 - 2001
Size
Costs
2004
Predictable
losses 2004
In top-25% highest costs, in 3 of 5 years
5.9%
2537
238
In top-25% highest costs, in 4 of 5 years
4.5%
3240
304
In top-25% highest costs, in 5 of 5 years
8.2%
6131
1757
Hospitalization in 2 of the 5 years
4.7%
3613
728
Hospitalization in 3 of the 5 years
1.1%
6606
2030
Hospitalization in 4 of the 5 years
0.3%
11763
5933
Hospitalization in 5 of the 5 years
0.1%
14373
6453
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New (potential) risk-adjusters
1. Many subgroups, from <1% to 30% of population,
with predictable losses in the order of hundreds
to thousands euros per person per year.
2. Also predictable losses for subgroups of insured
whose disease is included as a risk adjuster in
the risk equalization formula (e.g. heart
problems, cancer, …).
3. Improvement of the risk equalization system
needs a high priority. Otherwise the
disadvantages due to risk selection may
outweigh the advantages of competition.
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Erasmus University Rotterdam
Erasmus University Rotterdam
3404
10.0%
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Conclusions
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21.2%
Worst score Physical functioning (SF36)
Results (costs and losses in euro)
Subgroup 2001
Astma, chronic bronchitis, emphysema
Costs Predictable
2004 losses 2004
Self-reported health status fair/poor
ARM Orlando 03Jun07
Results (costs and losses in euro)
Size
• Diagnostic information not only from
prior hospitalization, but from all prior
medical encounters (Diagnosis Treatment
Combinations, DTCs) expected to be
implemented in 2009;
• Multiyear-DCG’s;
• A better indicator of invalidity (or
functional heath status);
• Yes/no voluntary deductible;
• ……
ARM Orlando 03Jun07
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