Wednesday, June 01, 2016

Rocket Robin Hood

As in "rocket surgeon" Robin Hood:

"The risk adjustment program was designed to dissuade insurers from targeting only healthy people ... The problem is that measuring metrics often encourage companies to optimize their score"

Let's unpack this, shall we?

First, as we've noted before, "carriers have an incentive to make their own insureds look as sick as possible" if they want in on that sweet, sweet risk adjustment money. And let's face it, there's precious little they can do about making this happen; after all, there's no underwriting so they're actually shooting in the dark about what kind of demographic they're appealing to.

And second, it's not as if this is a deep, dark secret: heck, we've been blogging on it for years, as have many, many others.

Frankly, I fail to see the problem: carriers are simply following (willfully stupid) rules as intended, with entirely predictable results. When you incentivize a behavior, you tend to get more of it, no?

[Hat Tip: FoIB Joseph Snable]
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