Medical Risk Distribution Among Competing Health Plans

Will a payment system which reimburses health plans on the basis of the average health risk of their enrollees encourage them not to compete for enrollees on the basis of their health status? The five goals of this project were to (1) design a new conceptual model to identify characteristics of enrollees related to health status and expected need for health care in the forthcoming eligibility period; (2) develop a new empirical health risk-assessment model that combines baseline measures of these risk factors to predict future health needs; (3) generate adjustments to base vendor rates from the empirical model and implement this payment system for selected managed care plans; (4) evaluate the impact of the risk-adjusted payment system on vendor revenues, enrollment patterns, vendor decisions to contract with the state, and administrative costs; and (5) validate the model using available data to derive implications of the model for use by health care purchasers. The risk assessment system was developed using data from the benefit program for Washington state employees and their dependents, which is administered by the Washington Health Care Authority (HCA). Once the model has been developed and acceptable payment rates established, the HCA plans to contract with the health plans covering state employees to demonstrate the methodology.