1. pS R&D presentation: 25-05-05 Risk-bearing page 1 Risk-bearing in the Dutch health insurance Department of R&D AGIS Health Insurances Arnold van der Lee Head of Research Department of R&D AGIS Health Insurances Arnold van der Lee Head of Research

2. pS R&D presentation: 25-05-05 Risk-bearing page 2 Market share of AGIS AGIS Sickness funds: 1.4 miljon insured AGIS private insurance: 0.2 miljon insured Inhabitants: 16 miljon 1. AGIS Health Insurances, R&D

3. pS R&D presentation: 25-05-05 Risk-bearing page 3 Department of Research Information and analyses of: the insured persons, claims and insurance products not of the organizational costs cost containment analyses health insurance financing system, risk-bearing premium system, actuarial reserves health care research 2 senior researchers 1. AGIS Health Insurances, R&D

4. pS R&D presentation: 25-05-05 Risk-bearing page 4 2. Presentation The risk-bearing in the dutch health insurance Are the main purposes of the financing system met? Spin-off for contracting of care, pay for performance Presentation: subjects

5. pS R&D presentation: 25-05-05 Risk-bearing page 5 The main purposes of the financing system are : Stimulation of insurers to: contract efficient providers listen to the needs and wishes of the insurees insurees have equal access to good and affordable health insurance, level playing field for health insurance companies, Important conditions are: 3. Financing system: risk-bearing

6. pS R&D presentation: 25-05-05 Risk-bearing page 6 No charity

7. pS R&D presentation: 25-05-05 Risk-bearing page 7 3. Financing system: risk-bearing Goal government: Only competition based on quality and price of contracted care Therefore there are strong restrictions on the insurers: Accept everybody one package one flat rate premium per insurer Goal government: Only competition based on quality and price of contracted care Therefore there are strong restrictions on the insurers: Accept everybody one package one flat rate premium per insurer

8. pS R&D presentation: 25-05-05 Risk-bearing page 8 Therefore insurers need to be compensated for cost differences that they can’t influence, especially those caused by health status differences static dimension (compensate for existing losses and profits) dynamic dimension (also for future ones that will come because of the mobility of insurees) Therefore insurers need to be compensated for cost differences that they can’t influence, especially those caused by health status differences static dimension (compensate for existing losses and profits) dynamic dimension (also for future ones that will come because of the mobility of insurees) Because of the restriction to one flat rate premium: groups with predictable losses and profits 3. Financing system: risk-bearing

9. pS R&D presentation: 25-05-05 Risk-bearing Insured Central Fund Insurance company Income-related premium Risk adjusted capitation payments and risk sharing Flat-rate premium 88 % 12 % 3. Financing system: risk-bearing Standard insurance 50 %

10. pS R&D presentation: 25-05-05 Risk-bearing page 10 Risk adjusted capitation payments and risk sharing At the individual level: part 1: capitation payments part 2: high risk compensation At the sickness fund level: part 3: risk sharing 3. Financing system: risk-bearing

11. pS R&D presentation: 25-05-05 Risk-bearing Part 1: Capitation payments Ideally, capitation payments should reflect cost differences resulting from health status differences However, health status differences are measured only indirectly by : age and gender region and employment status and more directly by: Farmacy and diagnostic cost groups Ideally, capitation payments should reflect cost differences resulting from health status differences However, health status differences are measured only indirectly by : age and gender region and employment status and more directly by: Farmacy and diagnostic cost groups 3. Financing system: risk-bearing

12. pS R&D presentation: 25-05-05 Risk-bearing male, 20-24 years of age € 253 employed, rural area - € 25 total payment: € 228 male, 60-64 years of age € 954 disabled, urban area+ € 385 total payment: € 1.339 Part 1: Capitation payments (2000) 3. Financing system: risk-bearing

13. pS R&D presentation: 25-05-05 Risk-bearing page 13 Pharmacy Costs Groups (PCG) Male, 20-24 years employed rural area 1 = € 1 3. Financing system: risk-bearing Part 1: Capitation payments (2000)

14. pS R&D presentation: 25-05-05 Risk-bearing page 14 PCG groepen: (ex-ante 2003) national per insuree no PCG 89,42%-260 cara2,69%926 epilepsy0,44%1.187 heart diseases2,25%2.014 diseases of the stomach3,47%2.363 cancer0,01%11.305 HIV/AIDS0,04%13.011 3. Financing system: risk-bearing Part 1: Capitation payments (2000)

15. pS R&D presentation: 25-05-05 Risk-bearing Step 2: High Risk Compensation Risk-adjusters are not sufficient to reach the goal of the payment system Add: High risk sharing at the individual level Costs above € 12.500 threshold are risk-shared (for 90%) Risk-adjusters are not sufficient to reach the goal of the payment system Add: High risk sharing at the individual level Costs above € 12.500 threshold are risk-shared (for 90%) 3. Financing system: risk-bearing

16. pS R&D presentation: 25-05-05 Risk-bearing Step 3: Risk sharing Remaining distributional flaws are risk-shared at the aggregate sickness fund level Reduces incentives for both selection and efficiency Ministry of Health goal: – Maximum amount of risk for insurers – Minimum size of risk sharing Remaining distributional flaws are risk-shared at the aggregate sickness fund level Reduces incentives for both selection and efficiency Ministry of Health goal: – Maximum amount of risk for insurers – Minimum size of risk sharing 3. Financing system: risk-bearing

17. pS R&D presentation: 25-05-05 Risk-bearing What determines the amount of risk sharing? Theory: preferences of regulator with regard to selection and efficiency (PhD dissertation Erik van Barneveld) Practice: effects at level of sickness funds (agreement sickness funds and regulator) What determines the amount of risk sharing? Theory: preferences of regulator with regard to selection and efficiency (PhD dissertation Erik van Barneveld) Practice: effects at level of sickness funds (agreement sickness funds and regulator) 3. Financing system: risk-bearing Step 3: Risk sharing

18. pS R&D presentation: 25-05-05 Risk-bearing Restrictions at the sickness fund level determine the size of the risk sharing pool: Band width given capitation payments Band width after risk sharing [ ] criteria Band width after risk sharing [ ] criteria 3. Financing system: risk-bearing Step 3: Risk sharing

19. pS R&D presentation: 25-05-05 Risk-bearing The amount of insurance risk has increased as a consequence of lower risk sharing: 1990: 0% 1995: 3% 2000: 40% 2003: 43% 2005: near 50%, goal government 70% in 20?? 3. Financing system: risk-bearing Step 3: Risk sharing

20. pS R&D presentation: 25-05-05 Risk-bearing Ministry of Health wants to control costs therefore Health insurers must contain costs Incentive for insurers: win or loose insured Ministry of Health wants to control costs therefore Health insurers must contain costs Incentive for insurers: win or loose insured Step 3: Risk sharing and relation with cost containment 3. Financing system: risk-bearing

21. pS R&D presentation: 25-05-05 Risk-bearing Are there instruments to contain costs? In the past the sickness funds had no instruments to contain costs differences in costs per insured are not related to differences in efficiency more risk can only be introduced with more instruments for sickness funds to contain costs some are introduced with the new standard insurance In the past the sickness funds had no instruments to contain costs differences in costs per insured are not related to differences in efficiency more risk can only be introduced with more instruments for sickness funds to contain costs some are introduced with the new standard insurance Step 3: Risk sharing and relation with cost containment 3. Financing system: risk-bearing

22. pS R&D presentation: 25-05-05 Risk-bearing page 22 Means of transport as seen by government How do we get there?

23. pS R&D presentation: 25-05-05 Risk-bearing page 23 Means of transport as seen by insurers How do we get there?

24. pS R&D presentation: 25-05-05 Risk-bearing What are the options of the sickness fund? Stimulation of efficient health care (positive effect) Mitigation of inefficient health care (positive effect) Cream skimming/quality skimping (negative effect) Stimulation of efficient health care (positive effect) Mitigation of inefficient health care (positive effect) Cream skimming/quality skimping (negative effect) Step 3: Risk sharing and relation with cost containment 3. Financing system: risk-bearing

25. pS R&D presentation: 25-05-05 Risk-bearing system requirements: Maximizes incentives for cost containment minimize incentives for cream skimming fair compensation of the unequal distribution of risks Maximizes incentives for cost containment minimize incentives for cream skimming fair compensation of the unequal distribution of risks Step 3: Risk sharing and relation with cost containment 3. Financing system: risk-bearing

26. pS R&D presentation: 25-05-05 Risk-bearing Committee on enhancement of capitation model (WOR) Ministry of Health (chairman) Health Insurance Council (CVZ) Branch Organization (ZN) Participation Health Care Insurers (a.o. AGIS) Research institutes Committee on enhancement of capitation model (WOR) Ministry of Health (chairman) Health Insurance Council (CVZ) Branch Organization (ZN) Participation Health Care Insurers (a.o. AGIS) Research institutes Consensus model, technical approach 4. Development of the financing system

27. pS R&D presentation: 25-05-05 Risk-bearing page 27 Development of the system: approach of AGIS participation in branche organisation at policy and technical levels participation in committee of Ministry of Health cooperation with expert group of prof. Van de Ven: PhD research project by Piet Stam: optimizing sick fund budget research projects e.g. results per region 4. Development of the financing system

28. pS R&D presentation: 25-05-05 Risk-bearing page 28 4. Development of the financing system Before 1989 sickness funds were administrative organisations which executed the rules and regulations. They were fully compensated for all the claims they paid. In 1989 the first step to a new system was taken. The insured had to pay a flat-rate premium themselves. Yearly new elements were introduced and the risk- bearing for insurers increased from administration to risk-bearing

29. pS R&D presentation: 25-05-05 Risk-bearing page 29 System Changes: competition, client orientation free choice of “sickness funds” insured may change sickfunds every year and have to be accepted selective contracting of providers changes in coverage to and from AWBZ / additonal health insurance changes in groups that are compulsorily covered 4. Development of the financing system

30. pS R&D presentation: 25-05-05 Risk-bearing page 30 4. Development of the financing system Tremendous changes: “culture shock” very dynamic: rapid succession of changes unpredictable: changes are introduced and reversed System Changes:

31. pS R&D presentation: 25-05-05 Risk-bearing page 31 New developments: 2005: Diagnoses Treatment Combination (DBC), no-claim 2006: system change to one insurance system (risk- bearing from 9 milion to 16 milion insurees, change of definitions, higher reserves), better compensation for diabetes. 2007: Parts of Mental Health Care included. 4. Development of the financing system

32. pS R&D presentation: 25-05-05 Risk-bearing page 32 Insurers see warnings and opportunities

33. pS R&D presentation: 25-05-05 Risk-bearing page 33 New developments: 4. Development of the financing system Government wants to increase the risk for insurers to 70%, but, the first years there is not enough data to base the capitation payments on, therefore less risk-bearing

34. pS R&D presentation: 25-05-05 Risk-bearing page 34 The main purposes of the financing system are : Stimulation of insurers to: contract efficient providers listen to the needs and wishes of the insurees insurees have equal access to good and affordable health insurance, level playing field for health insurance companies, Important conditions are: 5. Are the goals of the financing system met? starts Yes But... Still But... Not yet

35. pS R&D presentation: 25-05-05 Risk-bearing page 35 Problems with level playing field Amsterdam and The Hague acknowledged by members WOR uncompensated diseases diabetes better compensation next year many diseases lack specific medications or hospital diagnoses for marker 5. Are the goals of the financing system met?

36. pS R&D presentation: 25-05-05 Risk-bearing page 36 Possible ways to react on remaining problems: Risk-selection (avoiding groups of insurees, be attratice to certain groups and unattractive to other groups) Contract efficient care improve financing model Risk-selection denies equal access to health insurance, and on a national level ecoomist tell us it has unwanted effects on the economy Agis chooses to help improve the financing model and chooses to contract efficient care 5. Are the goals of the financing system met?

37. pS R&D presentation: 25-05-05 Risk-bearing page 37 6. Spin-off for contracting of care Knowledge about the risk-bearing is also usefull for contracting models with “pay for performance”. In “pay for performance” the case-mix of the population has to taken into account it also shows where the cost of care is higher than the national level indicates where the care might be inefficient

38. pS R&D presentation: 25-05-05 Risk-bearing page 38 6. Spin-off for contracting of care 2006, solved? Yes? Than more insurees with diabetes and better contracting of care pays off Yes? Than more insurees with diabetes and better contracting of care pays off

39. pS R&D presentation: 25-05-05 Risk-bearing page 39 6. Spin-off for contracting of care Is this caused by a few patients with extreme high costs or by inefficient care? Is this caused by a few patients with extreme high costs or by inefficient care?

40. pS R&D presentation: 25-05-05 Risk-bearing page 40 Agis hopes for and helps to get a level playing field

41. pS R&D presentation: 25-05-05 Risk-bearing page 41 Agis sees nice oppertunities We hope you enjoy Amersfoort