Voluntary Deductibles and Risk Equalization: A complex interaction

Governments around the world use health insurance as an instrument to establish universal access to medical care. In some countries, e.g. Germany, the Netherlands and Switzerland, there is a trend towards managed competition among insurers and providers of care and towards higher levels of consumer cost sharing. A popular form of cost sharing is the voluntary deductible, i.e. the option for consumers to pay medical expenditures up to a certain amount themselves in return for a rebate on their out-of-pocket premium. Voluntary deductibles increase consumer choice and can reduce medical consumption. This study focuses on some crucial policy choices concerning the premium rebate for a voluntary deductible in the particular context of a competitive, social health insurance market. Here, competitive means that consumers can periodically switch among insurance plans offered by risk-bearing insurers and social means that a sponsor (e.g. government) aims at realizing risk- and income solidarity. Regarding the social aspects, this thesis will only focus on risk solidarity, i.e. the cross-subsidies from low-risk (e.g. the young and healthy) to high-risk consumers (e.g. the old and unhealthy) intended to make insurance plans affordable for the latter. For curative care, social health insurance schemes with competitive elements can be found, for instance, in Belgium, Germany, Ireland, the Netherlands, Switzerland, and the United States. In a competitive market, insurers are forced to adjust the premium rebate to the difference in (expected) expenses between consumers who choose a deductible and those who do not. From a social perspective, this market-based rebate might be unacceptable. T

A method to simulate incentives for cost containment under various cost sharing designs: an application to a first-euro deductible and a doughnut hole

Many health insurance schemes include deductibles to provide consumers with cost containment incentives (CCI) and to counteract moral hazard. Policymakers are faced with choices on the implementation of a specific cost sharing design. One of the guiding principles in this decision process could be which design leads to the strongest CCI. Despite the vast amount of literature on the effects of cost sharing

Selection Incentives for Health Insurers in the Presence of Sophisticated Risk Adjustment

This article analyzes selection incentives for insurers in the Dutch basic health insurance market, which operates with community-rated premiums and sophisticated risk adjustment. Selection incentives result from the interplay of three market characteristics: possible actions by insurers, consumer response to these actions, and predictable variation in profitability of insurance contracts. After a qualitative analysis of the first two characteristics our prima

Evaluatie Zorgstelsel en Risicoverevening. Acht jaar na invoering Zorgverzekeringswet: succes verzekerd?

__Abstract__ Met de invoering van de Zorgverzekeringswet (Zvw), de Wet Marktordening Gezondheidszorg (Wmg) en de Wet Toelating Zorginstellingen (WTZi) zijn in 2006 belangrijke stappen gezet in de richting van een zorgstelsel gebaseerd op gereguleerde concurrentie. Concurrentie heeft daarbij als doel om permanente prikkels tot doelmatigheidsverbetering te creëren en tevens mogelijkheden te genereren voor het bieden van kwalitatief goede zorg tegen een zo laag mogelijke prijs. Regulering heeft als doel om solidariteit en toegankelijkheid te garanderen en om marktfalen tegen te gaan. Gereguleerde concurrentie kan alleen tot kwalitatief goede, doelmatige en toegankelijke zorg leiden als aan belangrijke randvoorwaarden is voldaan: 1. Risicosolidariteit zonder ruimte voor risicoselectie 2. Voldoende transparantie en adequate consumenteninformatie over het beschikbare polis- en zorgaanbod 3. Adequate financiële prikkels tot doelmatigheid voor zowel consumenten, zorgverzekeraars als zorgaanbieders 4. Keuzevrijheid voor verzekerden op de zorgverzekeringsmarkt 5. Betwistbare markten, zowel bij de zorgverzekering als bij de zorgverlening 6. Contracteervrijheid 7. Effectief mededingingsbeleid 8. Geen liftersgedrag 9. Effectief toezicht op de minimumkwaliteit van zorg 10. Gegarandeerde toegang tot basiszorg. In dit onderzoek is nagegaan in hoeverre voor de somatische curatieve zorg thans aan deze randvoorwaarden is voldaan en worden oplossingen aangedragen voor de geconstateerde knelpunten

Potential determinants of deductible uptake in health insurance: How to increase uptake in The Netherlands?

In health insurance, voluntary deductibles are offered to the insured in return for a premium rebate. Previous research has shown that 11 % of the Dutch insured opted for a voluntary deductible (VD) in health insurance in 2014, while the highest VD level was financially profitable for almost 50 % of the population in retrospect. To explain this discrepancy, this paper identifies and discusses six potential determinants of the decision to opt for a VD from the behavioral economic literature: loss aversion, risk attitude, ambiguity aversion, debt aversion, omission bias, and liquidity constraints. Based on these determinants, five potential strategies are proposed to increase the number of insured opting for a VD. Presenting the VD as the default option and providing transparent information regarding the VD are the two most promising strategies. If, as a result of these strategies, more insured would opt for a VD, moral hazard would be reduced

Risicoverevening tussen zorgverzekeraars: Kwantificering modelverbeteringen 1993-2011

Het ex-ante vereveningsmodel van de Zorgverzekeringswet dient verzekeraars te compenseren voor voorspelbare, gezondheidsgerelateerde kostenverschillen tussen verzekerden. Zonder goed vereveningsmodel worden verzekeraars – vanwege het verbod op premiedifferentiatie – geconfronteerd met voorspelbare winsten op gezonde verzekerden en voorspelbare verliezen op chronisch zieken. Voorspelbare winsten en verli

A voluntary deductible in health insurance: the more years you opt for it, the lower your premium?

Adverse selection regarding a voluntary deductible (VD) in health insurance implies that insured only opt for a VD if they expect no (or few) healthcare expenses. This paper investigates two potential strategies to reduce adverse selection: (1) differentiating the premium to the duration of the contract for which the VD holds (ex-ante approach) and (2) differentiating the premium to the number of years for which insured have opted for a VD (ex-post approach). It can be hypothesized that premiums will decrease with the duration of the contract or the number of years for which insured have opted for a VD, providing an incentive to insured to opt for a deductible also in (incidental) years they expect relatively high expenses. To test this hypothesis, we examine which premium patterns would occur under these strategies using data on healthcare expenses and risk characteristics of over 750,000 insured from 6 years. Our results show that, under the assumptions made, only without risk equalization the premiums could decrease with the duration of the contract or the number of years for which insured have opted for a VD. With (sophisticated) risk equalization, decreasing premiums seem unfeasible, both under the ex-ante and ex-post approach. Given these findings, we are sceptical about the feasibility of these strategies to counteract adverse selection

Saving for health care: an interesting option to increase the attractiveness of voluntary deductibles

__Abstract_ In the last decade, the average public health expenditures per capita in OECD countries increased by 76 per c

Overpaying morbidity adjusters in risk equalization models

Most competitive social health insurance markets include risk equalization to compensate insurers for predictable variation in healthcare expenses. Empirical literature shows that even the most sophisticated risk equalization models—with advanced morbidity adjusters—substantially undercompensate insurers for selected groups of high-risk individuals. In the presence of premium regulation, these undercompensations confront consumers and insurers with incentives for risk selection. An important reason for the undercompensations is that not all information with predictive value regarding healthcare expenses is appropriate for use as a morbidity adjuster. To reduce incentives for selection regarding specific groups we propose overpaying morbidity adjusters that are already included in the risk equalization model. This paper illustrates the idea of overpaying by merging data on morbidity adjusters and healthcare expenses with health survey information, and derives three preconditions for meaningful application. Given these preconditions, we think overpaying may be particularly useful for pharmacy-based cost groups