Controlling Indirect Selection under Healthcare Reform - Society of ...

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v TABLE OF CONTENTS CHAPTER PAGE I. INTRODUCTION ............................................................................................................................. 1 II. Selection and Adverse Selection .................................................................................................... 4 A. Selection and Adverse Selection ..................................................................................... 4 B. Pre-Healthcare Reform Balanced Selection ..................................................................... 7 C. Direct Selection .............................................................................................................. 9 D. Indirect Selection ......................................................................................................... 11 E. Individual Insurers vs. The Collective ............................................................................ 13 F. Consumers Demand Change ......................................................................................... 15 G. Other Changes to Balance the System .......................................................................... 16 H. Risk Adjustment .......................................................................................................... 19 1. Described......................................................................................................... 19 2. Omitted Variables ............................................................................................ 22 3. Pockets of Opportunity .................................................................................... 29 4. Mechanics ....................................................................................................... 30 I. Deciding to Select ......................................................................................................... 37 J. Social Costs .................................................................................................................. 40 III. INDIRECT SELECTION UNDER HEALTHCARE REFORM ................................................................... 45 A. Intent ........................................................................................................................... 45 B. Consumer Marketing Data ............................................................................................ 48 C. Predictive Model Recipes ............................................................................................. 53 D. Selection Touch Points ................................................................................................. 58 1. Conceptual Model............................................................................................ 58 2. System Perspective .......................................................................................... 61 E. Market Segmentation ................................................................................................... 62 F. Academic Shortcomings ............................................................................................... 63 G. Neighborhoods ............................................................................................................. 65 H. Income ......................................................................................................................... 67 I. The Game .................................................................................................................... 67 IV. PUBLIC POLICY CHALLENGES........................................................................................................ 71 A. Regulating the Invisible ................................................................................................ 71 B. Legitimate Ambiguity ................................................................................................... 72 C. Asymmetrical Challenge ............................................................................................... 73 D. Moving Target .............................................................................................................. 74 E. Appropriate Incentives ................................................................................................. 74 F. Regulatory Costs........................................................................................................... 75 G. Political Acceptability ................................................................................................... 75 H. Regulatory Resources ................................................................................................... 77 V. CONTROLLING INDIRECT SELECTION ............................................................................................ 78 A. Conceptual Model ........................................................................................................ 78 B. Federal or State ............................................................................................................ 81
vi C. Regulatory Timing ........................................................................................................ 82 D. Tools ............................................................................................................................ 84 1. Improved Risk Adjustment .............................................................................. 86 2. Market Entry .................................................................................................... 91 3. Plan Design ...................................................................................................... 95 4. Marketing ...................................................................................................... 100 5. Enrollment ..................................................................................................... 104 6. Post-Enrollment ............................................................................................. 107 7. Care Management ......................................................................................... 109 8. Providers ....................................................................................................... 110 E. Monitoring ................................................................................................................. 115 F. Enforcement with Penalties ........................................................................................ 118 G. Feedback Loops .......................................................................................................... 118 VI. CONCLUSION ............................................................................................................................. 120 REFERENCES ............................................................................................................................. 123 APPENDIX ................................................................................................................................. 135 VITA ......................................................................................................................................... 200
Page 1 and 2: Controlling Indirect Selection unde
Page 3: iv ACKNOWLEDGEMENTS I am thankful f
Page 7 and 8: viii 22. Profit = .................
Page 9 and 10: x MEPS P&C PBM PHI PPACA RA SES SOA
Page 11 and 12: I. INTRODUCTION Consultants from th
Page 13 and 14: 3 This paper is meant to be a prime
Page 15 and 16: 5 1970; Rothschild & Stiglitz, 1976
Page 17 and 18: 7 the right side of the bar. With r
Page 19 and 20: 9 limits choice for other high risk
Page 21 and 22: 11 2. Process. Direct selection is
Page 23 and 24: 13 just a department. This expansiv
Page 25 and 26: 15 F. Consumers Demand Change Direc
Page 27 and 28: 17 2. Risk adjustment (PPACA, Secti
Page 29 and 30: 19 consumer selection. This section
Page 31 and 32: 21 Whether the adjustment occurs vi
Page 33 and 34: 23 risk. 43 Today’s risk adjustme
Page 35 and 36: 25 Figure 8 Other Predictive Variab
Page 37 and 38: 27 Genetics are also important. A d
Page 39 and 40: 29 generally socially and economica
Page 41 and 42: 31 of costs and very few have $50,0
Page 43 and 44: 33 have no recent diagnoses or pres
Page 45 and 46: 35 Unidentified Sick are unidentifi
Page 47 and 48: 37 Figure 15 Demonstration: Financi
Page 49 and 50: 39 The benefits of indirect selecti
Page 51 and 52: 41 get insurance or gets it on less
Page 53 and 54: 43 Assuming that at least some insu
Page 55 and 56:
III. INDIRECT SELECTION UNDER HEALT
Page 57 and 58:
47 insurers should use a Lifestyle
Page 59 and 60:
49 Figure 19 Neighborhood-Level Dat
Page 61 and 62:
51 This list of data elements align
Page 63 and 64:
53 Consumer marketing databases pro
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55 Figure 23 New Business Predictiv
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57 diabetics while finding ways to
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59 risk insureds, “skimping” wi
Page 71 and 72:
61 Figure 28 The model is consisten
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63 Insurers will rely upon predicti
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65 that they are related to the cha
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67 profitable and the second neighb
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69 relevant to insurers with a larg
Page 81 and 82:
IV. PUBLIC POLICY CHALLENGES Indire
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73 will never be a clear line betwe
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75 healthcare cost variance outside
Page 87 and 88:
77 to educate poor children. Althou
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79 Figure 30 Dynamic System: The ke
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81 regulators. If regulators don’
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83 regulatory front, while struggli
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85 in Chapter 3. The discussion wil
Page 97 and 98:
87 1A: Include family income in ris
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89 example, assigning a risk premiu
Page 101 and 102:
91 2. Market Entry Regulators desig
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93 2A: Individual insurance only fr
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95 “restricting choices”. It is
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97 adverse consumer selection. Whil
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99 3B: Fixed benefit designs. It is
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101 There is general consensus in t
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103 4D: Agent restrictions. At a mi
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105 Figure 35 Regulatory Options 5
Page 117 and 118:
107 6. Post-Enrollment Consumer sel
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109 6E: Disenrollment per head pena
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111 While insurers cannot directly
Page 123 and 124:
113 the insureds who have a diagnos
Page 125 and 126:
115 E. Monitoring If regulations ar
Page 127 and 128:
117 enrollment and disenrollment ra
Page 129 and 130:
119 publicly discussed. Discussing
Page 131 and 132:
121 Such a strategy is dependent up
Page 133 and 134:
REFERENCES AAA. (2009). Issue Brief
Page 135 and 136:
125 Byrne, S. K. (2008). Healthcare
Page 137 and 138:
127 Gallo, L. C., Penedo, F. J., Ex
Page 139 and 140:
129 Lewin Group. (2010). Individual
Page 141 and 142:
131 Riley, T. (2010). Reform has a
Page 143 and 144:
133 van Barneveld, E., van Vliet, R
Page 145 and 146:
APPENDIX Health Insurance Risk Adju
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Appendix 137 ABSTRACT The U.S. Pati
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Appendix 139 BACKGROUND As expresse
Page 151 and 152:
Appendix 141 not eligible for subsi
Page 153 and 154:
Appendix 143 Starting in 2011 insur
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Appendix 145 1) Current conditions
Page 157 and 158:
Appendix 147 First consider the lin
Page 159 and 160:
Appendix 149 counter this argument.
Page 161 and 162:
Appendix 151 Current Risk Adjustmen
Page 163 and 164:
Appendix 153 Model 4 fits the risk
Page 165 and 166:
Appendix 155 An examination of the
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Appendix 157 ANALYSIS Data Descript
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Appendix 159 Specifically, the anal
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Appendix 161 Equation 1 Proxy Expen
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Appendix 163 Expenditures have been
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Appendix 165 Equation 3 Normalized
Page 177 and 178:
Appendix 167 The technical difficul
Page 179 and 180:
Appendix 169 prediction residuals?
Page 181 and 182:
Appendix 171 The lower income and h
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Appendix 173 RESULTS The results ar
Page 185 and 186:
Appendix 175 Figure 12 Income Effec
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Appendix 177 LIMITATIONS The analys
Page 189 and 190:
Appendix 179 Likewise, due to healt
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Appendix 181 DISCUSSION Even with t
Page 193 and 194:
Appendix 183 Much of Jost’s timel
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Appendix 185 RECOMMENDATIONS Based
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Appendix 187 TABLES
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Appendix 189
Page 201 and 202:
Appendix 191
Page 203 and 204:
Appendix 193 REFERENCES AAA. (2010)
Page 205 and 206:
Appendix 195 Diez Roux, A. A. (2001
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Appendix 197 McKinsey & Company. (2
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Appendix 199 WHO. (2005). Facing th
Page 211 and 212:
TIA GOSS SAWHNEY Vita 201 Directo
Page 213 and 214:
TIA GOSS SAWHNEY Vita 203 “Busine
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