Very high and low residual spenders in private health insurance markets: Germany, The Netherlands and the U.S. Marketplaces

We study the extremely high and low residual spenders in individual health insurance markets in three countries. A high (low) residual spender is someone for whom the residual—spending less payment (from premiums and risk adjustment)—is high (low), indicating that the person is highly underpaid (overpaid). We begin with descriptive analysis of the top and bottom 1% and 0.1% of residuals building to address the question of the degree of persistence in membership at the extremes. Common findings emerge among the countries. First, the diseases found among those with the highest residual spending are also disproportionately found among those with the lowest residual spending. Second, those at the top of the residual spending distribution (where spending exceeds payments the most) account for a massively high share of the unexplained variance in the predictions from the risk adjustment model. Third, in terms of persistence, we find that membership in the extremes of the residual spending distribution is highly persistent, raising concer