A demand-side view of risk adjustment

Citation
R. Feldman et al., A demand-side view of risk adjustment, INQUIRY-J H, 38(3), 2001, pp. 280-289
Citations number
31
Language
INGLESE
art.tipo
Article
Categorie Soggetti
Public Health & Health Care Science","Health Care Sciences & Services
Journal title
INQUIRY-THE JOURNAL OF HEALTH CARE ORGANIZATION PROVISION AND FINANCING
ISSN journal
0046-9580 → ACNP
Volume
38
Issue
3
Year of publication
2001
Pages
280 - 289
Database
ISI
SICI code
0046-9580(200123)38:3<280:ADVORA>2.0.ZU;2-C
Abstract
This paper analyzes the efficient allocation of consumers to health plans. Specifically, we address the question of why employers that offer multiple health plans often make larger contributions to the premiums of the high-co st plans. Our perspective is that the subsidy for high-cost plans represent s a form of demand-side risk adjustment that improves efficiency. Without s uch subsidies (and ill the absence of formal risk adjustment), too few empl oyees would choose the high-cost plans preferred by highrisk workers. We te st the theory by estimating a model of the employer premium subsidy, using data from a sun,ey of large public employers ill 1994. Our empirical analys is shows that employers are more likely to subsidize high-cost plans when t he benefits of risk adjustment are greater. The findings suggest that the p remium subsidy can accomplish some of the benefits of formal risk adjustmen t.