is horizontal integration. (a) (/ point) Describe four risk classification schemes and the circumstances when each is used. You are evaluating an additive risk adjustment model in a market with

is horizontal integration. (a)
(/ point) Describe four risk classification schemes and the circumstances when
each is used.
You are evaluating an additive risk adjustment model in a market with two insurers.
The insurer with a lower average risk profile will have to pay out money to the other
insurer to compensate it for enrolling higher risk members.
Each insurer has been given the choice of using one of two methods to determine the
payout:
Method I uses only the risk score model
Method 2 uses the expected claims costs by risk category, where the risk
classification is assigned using the risk score model
Risk Score Model
Risk Weight
Variable
Female
Male
0 – 34 Years
0.500
0.550
35 – 44 Years
0.590
0.620
45 – 54 Years
0.650
0.680
55 – 64 Years
0.700
0.720
65 Years or Over
0.750
0.800
Diabetes
0.950
Congestive Heart Failure
0.430
Immune Disorders
0.610
Hypertension
0.200
Insurer Demographics
Insurer A
Insurer B
100 females aged between 35 and
100 females aged between 46
39 years with no conditions
and 50 years with no conditions
200 males between 46 and 52 years
50 males between 31 and 33
with diabetes and hypertension
years with congestive heart
failure
100 females aged 56 to 63 years
50 males aged 66 to 71 years
with diabetes and immune disorders
with diabetes and congestive
heart failure Expected Claims Costs by Risk Category
Risk Classification
Risk Weight
Expected Claim Costs
Per Member Per Month
Low
Equal to or
less than 0.500
$200
Greater than 0.500 but
Average
$500
less than 1.500
gh
Greater than or
equal to 1.500
$1.000
(b) (3 points) Calculate the relative risk factor for each insurer using:
(i)
Method 1
(ii)
Method 2
Show your work.
(c)
(/ point) Evaluate the challenges of allowing each insurer to choose its own
approach. Justify your response. (a) (2 points) Describe contracting considerations for the following types of
physicians:
Primary and specialty care
(ii)
Hospital-based
(ili) Non-physician practitioners of primary care
(b)
(/ point) Compare and contrast financial considerations of salaried versus self-
employed physicians.
You are given the following contract terms for an independent specialty care physician:
Reimbursement rate
102% of original Medicare fee schedule:
placement on tier 2 of 3 for member cost sharing
Managed care fee
$10 per patient per year for access to medical records
Access
Referrals from PCP required for in-network access
New patient bonus
$100 per patient bonus if the patient is new to both the
insurer and the physician
Renewal
Review for renewal every 3 years
(c) (2 points) Critique the contract terms from the perspective of the:
Physician
Insurer