Risk equalisation in Ireland and Australia: a simulation analysis to compare outcomes

Armstrong, John and Paolucci, Francesco (2010) Risk equalisation in Ireland and Australia: a simulation analysis to compare outcomes. The Geneva Papers on Risk and Insurance Issues and Practice, 35 (4). pp. 521-538. ISSN 1018-5895

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Official URL: http://dx.doi.org/10.1057/gpp.2010.23

Abstract

Risk equalisation has been implemented in a number of countries as a means of providing explicit risk-adjusted transfers between health insurance undertakings to improve efficiency within the health insurance market, and make health insurance affordable. Two such countries are Australia and Ireland. In this article, a simulation exercise is carried out to compare the effectiveness of the two countries’ risk equalisation schemes in meeting the policy objectives of encouraging insurers to be efficient and discouraging them from engaging in risk selection. The results of the analysis show that the Australian scheme is less effective than the Irish scheme in reducing the incentive for risk selection and in encouraging insurers to be efficient. The results provide evidence that direct standardisation mechanisms (as used in Ireland) can lead to superior outcomes as compared to indirect standardisation mechanisms (as used in Australia) in terms of promoting efficiency and deterring risk selection.

Item Type: Article
Uncontrolled Keywords: risk selection, community rating, direct and indirect standardisation
Subjects: B900 Others in Subjects allied to Medicine
L100 Economics
Department: Faculties > Health and Life Sciences > School of Health, Community and Education Studies > Healthcare
Depositing User: Ay Okpokam
Date Deposited: 17 Apr 2012 09:38
Last Modified: 10 Aug 2015 11:40
URI: http://nrl.northumbria.ac.uk/id/eprint/6221

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