Conventional insurers routinely screen applicants for medical problems, denying coverage to the sickest or charging them higher premiums. But less straightforward methods dominate when prepaid health plans agree to accept all members of a government insurance program or employee group. And new factors come into play when managed-care companies control the delivery of care as well as its financing. Health plans' quest for low-cost doctors and hospitals can affect the membership profile, too. In my long experience in HMO administration . . .
Health economists say most medical needs are unpredictable.
At the Health Insurance Plan of California, the early results are mixed. Since the program was started in 1996, there have been three rounds of adjustments, and the variation in medical risk among participating health plans has narrowed dramatically. That's what's supposed to happen. As a result of the December 1997 adjustments, the health plan that gains the most gets an upward risk adjustment of 4.95 percent, and the one that loses the most gets a downward adjustment of 3.14 percent. By contrast, the December 1995 adjustments ranged from an increase of 20.09 percent to a reduction of 6.04 percent.