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What kind of risk adjustment systems are necessary for health insurance exchanges?

October 25th, 2010

By jeremy.engdahl-johnson

The Patient Protection and Affordable Care Act (PPACA) mandates that states establish one or more health insurance exchanges by January 2014. Under this business paradigm, private health insurance carriers will compete on price and quality in order to attract this new pool of insured consumers. People who have previously been under- or uninsured may find exchanges an attractive option when purchasing health insurance. But claim experience, including cost and utilization patterns, of the under- and uninsured population are mostly unknown to private health insurers at this time. This paper by Rong Yi and Diane Laurent examines the adequacy of current risk adjustment systems when applied to a wholly new type of enrollment—the “all-population risk pool”—and offers considerations and explores options for exchange designers.

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