Computational health economics for identification of unprofitable health care enrollees

Health insurers may attempt to design their health plans to attract profitable enrollees while deterring unprofitable ones. Such insurers would not be delivering socially efficient levels of care by providing health plans that maximize societal benefit, but rather intentionally distorting plan benefits to avoid high-cost enrollees, potentially to the detriment of health and efficiency. In this work, we focus on a specific component of health plan design at risk for health insurer distortion in the Health Insurance Marketplaces: the prescription drug formulary. We introduce an ensembled machine learning function to determine whether drug utilization variables are predictive of a new measure of enrollee unprofitability we derive, and thus vulnerable to distortions by insurers. Our implementation also contains a unique application-specific variable selection tool. This study demonstrates that super learning is effective in extracting the relevant signal for this prediction problem, and that a small number of drug variables can be used to identify unprofitable enrollees. The results are both encouraging and concerning. While risk adjustment appears to have been reasonably successful at weakening the relationship between therapeutic-class-specific drug utilization and unprofitability, some classes remain predictive of insurer losses. The vulnerable enrollees whose prescription drug regimens include drugs in these classes may need special protection from regulators in health insurance market design.