Selection in health insurance markets and its policy remedies

摘要

Publicly financed health insurance programs in the United States have in recent years come to rely more heavily on private insurance markets where individuals choose from a variety of plans designed by private sector insurers. This change is especially apparent in the growth of the Medicare Advantage program and the creation of the state-level health insurance Marketplaces by the Patient Protection and Affordable Care Act of 2010. The health insurance contracts actually offered to individuals by private insurers clearly reflect the reality that selection incentives matter. Although the consequences of adverse selection can be limited by risk adjustment, premium rating regulations, mandates/subsidies, and contract regulations, there is still a great deal that we don't know about what optimal plan payment policies look like. Glazer and McGuire (2000, 2002) took early steps towards developing a theory of optimal risk adjustment, but both the markets in which these policies are used and the technology of risk adjustment itself are much more complex than was originally anticipated. For example, we now know that plans with heterogeneous cost structures imperfectly compete alongside each other in the same market. Additionally, risk scores appear to be highly endogenous to the plan a consumer chooses and the contract an insurer designs. Thus, even with policies to limit selection in place, these issues are ongoing. It seems to be an inescapable fact, at least at the current state of knowledge, that risk adjustment and other plan payment policies are unable to capture all relevant dimensions of consumers' expected health care spending.