Capital requirements of health insurers under different risk-adjusted capitation payments

Defining optimal capital requirements for health insurers is a matter of interest for policy-makers. They determine the insolvency probability of health insurers and the minimum number of enrolees in order to keep insolvency under control. In this paper we develop a methodology for estimating the ex...

Full description

Autores:
Riascos Villegas, Álvaro José
Serna, Natalia
Guerrero, Ramiro
Tipo de recurso:
Work document
Fecha de publicación:
2017
Institución:
Universidad de los Andes
Repositorio:
Séneca: repositorio Uniandes
Idioma:
eng
OAI Identifier:
oai:repositorio.uniandes.edu.co:1992/8712
Acceso en línea:
http://hdl.handle.net/1992/8712
Palabra clave:
Risk based capital
Capitation
Health insurers
Risk adjustment
Loss distribution
Seguros de salud - Análisis econométrico - Colombia
Unidad de pago por capitación
Evaluación de riesgos contra la salud - Colombia
I11, I13, I18
Rights
openAccess
License
http://creativecommons.org/licenses/by-nc-nd/4.0/
Description
Summary:Defining optimal capital requirements for health insurers is a matter of interest for policy-makers. They determine the insolvency probability of health insurers and the minimum number of enrolees in order to keep insolvency under control. In this paper we develop a methodology for estimating the expected loss per health insurer after considering their specific risk profile and the capitation formula with which they are paid. We assume the expected loss follows a normal distribution within risk pools consisting of a unique combination of long-term disease, age, gender, and location, and then define the minimum capital requirement as the 1st quantile of the loss distribution. An application is made for insurers in the statutory health care system of Colombia. Our results show that under normal expenditures with ex-ante morbidity risk adjustment using long-term disease groups, if capitation payments were conditional on long-term diseases too, riskier insurers should have significantly higher capital requirements compared to those generated by the current government capitation formula, which reimburses only on demographic variables, while less risky insurers should have lower capital requirements.