REINSURANCE, REPAYMENTS, AND RISK ADJUSTMENT IN INDIVIDUAL HEALTH INSURANCE
McGuire, Schillo and Van Cleef provide an additional perspective to conventional risk-adjustment. They say:
Reinsurance can complement risk adjustment of health plan payments to improve fit of payments to plan spending at the individual and group level. This paper proposes three improvements in health plan payment systems using reinsurance. First, we base reinsurance payments on spending not accounted for by the risk adjustment system, rather than just high spending. Second, we propose pairing reinsurance for individual-level losses with repayments for individual-level profits. Third, we optimize the weights on the risk adjustors taking account of the presence of reinsurance/repayment.
It sounds good, however technical requirements are demanding to be to implemented.
