Reclassification Risk Management in the Health Insurance Market of Iran

Document Type : Original Article


1 Department of Health Economics, Faculty of Management and Economics, Tarbiat Modares University, Tehran, Iran

2 Department of Economic Development and Planning, Faculty of Management and Economics, Tarbiat Modares University, Tehran, Iran

3 Department of Agricultural Economics, Economic Research Institute, Tarbiat Modares University, Tehran, Iran


Introduction: Reclassification risk in the health insurance market happens when premium
prices are determined based on the health level. It is necessary for insurance applicants to
manage this risk due to uncertainty about the individual’s health status in later periods.
Guaranteed renewable insurance fully covers this risk because the health level is not taken
into account in calculating the premiums. This study is an attempt to calculate the welfare
benefits resulting from the coverage of this risk by providing guaranteed renewable insurance
in this market.
Methods: The economic welfare model in the form of computable general equilibrium has
been used to measure welfare. The model is calibrated by the data of social accounting matrix
and national health accounts in 2011. Social accounting matrix is extracted based on the latest
input-output table for the economy of Iran presented in this yea
Results: The results show that, in general, the more guaranteed renewable insurance expands
in the health insurance market, the greater the welfare effects will be; therefore, the elimination
of basic insurance from this market and provision of the same insurance for all people in the
form of guaranteed renewable insurance (complete elimination of reclassification risk) can
increase economic welfare up to 6%.
Conclusion: Reclassification risk management by providing guaranteed renewable insurance
in the health insurance market of Iran, due to increasing the welfare of the insured, will lead
to the provision of a unit insurance plan and equal access to health services for all.


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