Design and Pricing of Tiered Network Health Plans, Health Watch, May 2009

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The TNHP savings formula is stated as:
N% * [M% + Shift * (P% - M%)]

To account for those users who decided not to shift due to increased member liability(M%), shouldn’t this formula be stated as:
N% * [(1-Shift) * M% + Shift * (P% - M%)] ?

If you wanted to think of it that way, you would need to get rid of the “- M%” in the shifted portion. I.e. N% * [(1 - Shift) * M% + Shift * (P%)]

So members who do not shift are paying the member cost sharing (M%), while members who do shift are saving the plan differential (P%).

Thank you, that makes sense.