Re-Insurance in the Swiss health insurance market: fit, power, and balance

Schmid, Christian Philipp; Beck, Konstantin (2016). Re-Insurance in the Swiss health insurance market: fit, power, and balance. Health Policy, 120(7), pp. 848-855. Elsevier 10.1016/j.healthpol.2016.04.016

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Risk equalization mechanisms mitigate insurers’ incentives to practice risk selection. On the other hand, incentives to limit healthcare spending can be distorted by risk equalization, particularly when risk equalization payments depend on realized costs instead of expected costs. In addition, cost-based risk equalization mechanisms may incentivize health insurers to distort the allocation of resources among different services. The incentives to practice risk selection, to limit healthcare spending, and to distort the allocation of resources can be measured by fit, power, and balance, respectively. We apply these three measures to evaluate the risk adjustment mechanism in Switzerland. Our results suggest that it per-forms very well in terms of power but rather poorly in terms of fit. The latter indicates that risk selection might be a severe problem. We show that re-insurance can reduce this problem while power remains on a high level. In addition, we provide evidence that the Swiss risk equalization mechanism does not lead to imbalances across different services.

Item Type:

Journal Article (Original Article)


03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Schmid, Christian Philipp


300 Social sciences, sociology & anthropology > 330 Economics








Dino Collalti

Date Deposited:

04 Jul 2017 11:24

Last Modified:

12 Nov 2019 15:38

Publisher DOI:


Uncontrolled Keywords:

Health insurance; Risk adjustment; Re-insurance




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