The document discusses risk sharing and risk pooling in the Dutch health care system. It notes that over the past 20 years, the Dutch government has gradually reduced risk sharing and risk pooling arrangements between health insurers. As a result, the financial risk that insurers take on for exceeding their predicted health care budgets has increased from 0% in 1992 to around 90% in 2012. The document contrasts the Dutch system of budgetholding insurers with that of commissioning entities in England, noting some differences that could lead to interesting policy discussions.

1. Risk sharing and risk pooling:
perspective from the Netherlands
Erasmus University Rotterdam
Nuffield Trust
Health Policy Summit 2012
29 February 2012
Wotton House, Surrey
Wynand P.M.M. van de Ven
Erasmus University Rotterdam
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2. Dutch health care system
• Health care costs 2009: 12% GDP;
• National Health Insurance (NHI, 2006)
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• Mandate for everyone in the Netherlands
to buy individual private health insurance;
• Broad coverage: e.g. physician services,
hospital care, drugs, medical devices,
rehabilitation, prevention, mental care,
dental care (children).
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3. Health Insurance Act (2006)
• Insurers are assumed to be(come) the
purchaser of care for their enrollees;
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• Selective contracting allowed;
• Free consumer choice of insurer;
• Open enrolment;
• PBRA-budget (risk equalization);
• Risk sharing and risk pooling;
• Insurer: ‘Budgetholding commisioning entity’
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4. Risk sharing and risk pooling
• For each enrollee an insurer receives an
ex-ante determined budget (‘equalization
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payment’) which is based on the PBRA-
formula and the risk characteristics of
that person.
• This budget equals the predicted next
year’s expenses for that person covered
by the NHI minus a fixed amount (to be
compensated by the consumer’s out-of-
pocket premium).
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5. Risk adjusters in the Netherlands
Year New risk adjuster
1992 Age/gender
1995 Region, yes/no employee, disability
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1997 Age/disability
2002 Pharmacy-based Cost Groups (PCGs)
(13 PCGs and about 7% of population)
2004 Diagnostic Cost Groups (DCGs) (about 2% of pop)
yes/no self-employed
2007 Multiple PCGs allowed (co-morbidity);
(20 PCGs and about 16% of population)
2008 Indicator of Socio-Economic Status
2012 Indicator of “multiple-years high-expenses”
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6. Why risk sharing and risk pooling?
1. Imperfections in the PBRA-formula
an incentive for risk selection;
no level playing field for the insurers;
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2. Government regulation with e.g. prices
and capacity
Insurers can not be held responsible for high
expenses
3. Imperfections of next year’s predicted
macro-budget to be allocated to the insurers
4. Protection against the risk of going
bankrupt (via voluntarily reinsurance).
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7. Forms of risk sharing and risk pooling
• Excess loss sharing: a percentage of each
consumer’s annual expenses above a threshold (e.g.
20,000 euro) is reimbursed
• Mandatory mutual pooling: a percentage of
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each insurer’s annual profit or loss must be pooled
among the insurers
• Proportional profit/loss-sharing:
a percentage of each insurer’s annual profit/loss is
shared with the risk equalization fund
• Outlier-profit/loss-sharing: each insurer’s
annual profit/loss outside a bandwidth is shared with
the risk equalization fund
• Macrobudget-compensation
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8. Reduction of the risk sharing
Last 20 years:
• Improvement of the PBRA-formula;
• liberalization of the health care system:
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 the insurers increasingly got more
tools to be an active purchaser of care.
Therefore the Dutch government
gradually reduced the extent of risk
sharing and risk pooling.
Consequently the financial risk for an
insurer (the ‘proportion of its profit/loss
for which the insurer is at risk’) increased.
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9. Average financial risk insurers
(excl. mental health care expenses)
Gem iddeld financieel risico van zorgverzekeraars (exclusief
m acronacalculatie en bandbreedteregeling)
100%
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90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
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10. Conclusion
Over a period of 20 years the financial
risk of the Dutch ‘budgetholding
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commissioning entities’ increased
from 0 in 1992 to about 90% in 2012.
If they exceed their PBRA-determined
budget, they have to raise their
premium or lower their financial
reserves.
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11. The Netherlands - England
Although the budgetholding
commissioning entities in England
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and the Netherlands both receive an
ex-ante determined budget based on a
sophisticated PBRA-formula, there
are some striking differences which
may evoke interesting discussions.
(Bevan and Van de Ven, 2010)
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12. Budgetholding commissioning entities
The England England
Netherlands (PCT) (CCG)
Out-of-pocket yes no no
premium paid
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by consumer?
Consumer yes no as yet
choice of (but choice of unknown
commissioner? hospital)
Financial yes (>11%) no; end of year as yet
reserves? underspend unknown
SHA
Sanction if higher management as yet
persistently premium; ‘challenge’; unknown
exceeding the less financial adjustment by
budget? reserves;
bankruptcy. SHA (ex-post)
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