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Robust risk adjustment in health insurance

Tengjiao Xiao(tex209***at***lehigh.edu)
Aurelie Thiele(aut204***at***lehigh.edu)

Abstract: Risk adjustment is used to calibrate payments to health plans based on the relative health status of insured populations and helps keep the health insurance market competitive. Current risk adjustment models use parameter estimates obtained via regression and are thus subject to estimation error. This paper discusses the impact of parameter uncertainty on risk scoring, and presents an approach to create robust risk scores to incorporate ambiguity and uncertainty in the risk adjustment model. This approach is highly tractable since it involves solving a series of linear programming problems.

Keywords: risk adjustment, health insurance, robust risk scores

Category 1: Applications -- OR and Management Sciences (Other )

Category 2: Robust Optimization

Citation: Technical report, Lehigh University, Industrial and Systems Department, August 2014

Download: [PDF]

Entry Submitted: 08/08/2014
Entry Accepted: 08/08/2014
Entry Last Modified: 08/08/2014

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