PubMed · 11913215
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Ariana Harner. 2002. Know your risk. Developing effective risk contracts.. https://pubmed.ncbi.nlm.nih.gov/11913215/
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This paper studies the relationship between health status and insurance participation, and between insurance status and medical use in the context of a social health insurance with an equalization fund (SHIEF). Under this system, revenues from a mandatory payroll tax are collected into a single pool (equalization fund) that reimburses for-profit insurance companies according to a capitated formula. Although competition should induce insurers to control costs without reducing the quality of service necessary to attract consumers, limitations in the capitation formula might induce insurers to select against bad risks, and limitations in the contribution system might induce more healthy individuals to evade enrollment. A three-equation model having social health insurance, private health insurance, and using medical services is estimated using a 1997 Colombian household survey. Consistent with similar studies, participation in SHIEF increases medical care use. On the other hand, the evidence on selection is somewhat mixed: individuals who report good health status are more likely to participate in SHIEF, while those without a chronic condition are less likely to participate in SHIEF.
Reform proposals of health care systems in several countries have advocated variations of a risk adjustment/capitation system. These proposals face a serious objection: incentives to risk selection are prevalent in the system. By now, considerable literature has been devoted to finding ways of mitigating, if not eliminating, this problem, while at the same time preserving incentives to efficiency. We contribute to this debate presenting a transfer system that, under some circumstances, attains both provider efficiency and no risk selection. The transfer system extends typical linear payment systems. It can be interpreted as a fixed transfer in the beginning of the period plus an ex-post fund at the end of the period. The novelty rests in the way contributions to this fund are defined.