Authors: Encinosa W, Seldon T.
Title: Designing Employer Health Benefits for Heterogeneous Workforces: Risk Adjustment and Its Alternatives.
Publication: Inquiry 38:270-9.
Date: Fall 2001
Abstract: Many health economists recommend that employers provide employees with a risk-adjusted choice among competing health insurance plans. Formal risk adjustment is, however, rarely if ever used by employers. This paper examines a range of health benefit design options that are available to employers, focusing attention not only on risk adjustment but also on its alternatives. We argue that while formal risk adjustment is rare, employers commonly use strategies that accomplish some of the same objectives and at less cost.
Topics: Cost, Insurance, Markets, Methods.
Author: Encinosa W.
Title: A comment on Neudeck and Podczeck's "adverse selection and regulation in health insurance markets."
Publication: Journal of Health Economics 20(4): 667-73.
Abstract: Using the Grossman equilibrium concept, Neudeck and Podczeck (Journal of Health Economics 15:387) show that imposing a minimum standard on a perfectly competitive insurance market can result in anti-competitive effects: decreased welfare with some insurers earning positive profits. However, the Grossman concept precludes an insurer from offering two separating, cross-subsidizing health plans. When an insurer can offer multiple plans (as under both the Nash and Miyazaki-Wilson equilibrium concepts), minimum standards result in a doubleton equilibrium, never allow positive total profits, and increase welfare. This is of interest since in 1997 more than half of establishments in the US offering choice of multiple plans did so through a single insurer.
Topics: Cost, Insurance, Markets.
Author: Encinosa W.
Title: The economics of regulatory mandates on the HMO market
Publication: Journal of Health Economics 20(1):85-107.
Abstract: Recently proposed HMO regulations have involved mandates of two forms: (1) minimum quality standards, and (2) mandated increases in access to specialty care. The author shows that piecemeal regulation, which uses only one of either mandate, may decrease welfare for all HMO consumers. Under full regulation using both mandates, if the minimum standard is set too low, a floor-to-ceiling effect occurs. This involves HMOs setting quality at the minimum standard, even when their quality would be above the standard in an unregulated market. Finally, the author show how premiums may either increase or decrease under a mandate.
Topics: Cost, Insurance, Managed Care.
Author: Chernew M, Encinosa W, Hirth R.
Title: Optimal health insurance: The case of multiple treatment options
Publication: Journal of Health Economics 19:(5)585-609.
Abstract: The authors explore optimal cost-sharing provisions for insurance contracts when individuals have observable, severe diseases with a discrete number of medically appropriate treatment options. Variation in preferences for alternative treatments is unobserved by the insurer and non-contractible. Interest in such situations is increasingly common, exemplified by disease carve-out programs and shared decision making tools. The authors demonstrate that optimal insurance charges a copay to patients choosing the high cost treatment and provides consumers of the low cost treatment a cash payment. A simulation of the effect of such a policy, based on prostate cancer, indicates a substantial reduction in moral hazard.
Topics: Cost, Insurance.
Author: Encinosa W, Sappington D.
Title: Adjusted community rate reforms to promote HMO participation in Medicare+ Choice.
Publication: Health Care Financing Review 21(1)19-29.
Abstract: The authors review the financial regulations imposed on HMOs that participate in the Medicare+ Choice program, and identify elements of the regulations that may discourage HMO participation in the program. They propose modifications of the regulations that can encourage the participation of HMOs without affording them excessive profit. The modifications include smoothing and bounding profit estimates, and authorizing and encouraging expanded use of benefit stabilization funds.
Topics: Cost, Insurance, Managed Care, Medicare.
Authors: Encinosa W, Sappington D.
Title: Competition among health maintenance
Publication: Journal of Economics and Management Strategy 6:129-50.
This article develops a model of competition among health maintenance
organizations (HMOs) to analyze the effects of market power, scale economics,
and asymmetric knowledge of health risk on market outcomes. Competition
among HMOs may, but need not, ensure socially preferred outcomes. Market
power or scale economics can sometimes admit socially preferred outcomes
when they would otherwise not arise. Asymmetric knowledge of health risk
may or may not be constraining. When it is constraining, a variety of patterns
of incomplete health insurance can arise, along with excessive or insufficient
treatment and preventive care for either high-risk or low-risk individuals.
Topics: Cost, Managed Care, Markets.
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