Exploration of Market-Based Risk Adjustments for Adverse Selection in Health Insurance

How can "risk" in the health insurance market be spread more fairly and efficiently among plans? This project explored alternative ways to compensate health plans that incur adverse risk selection outside of the most commonly discussed risk adjustment mechanisms. The researcher explored how other markets with asymmetric information and unequal risk levels spread the risk among suppliers (e.g., high risk auto insurance, secondary mortgage markets, futures and options, community rating, etc.). The goal of the research was to assist policy makers in determining whether the government should encourage or implement a market-driven method of determining risk for health insurance.