Reclassification Risk Management in the Health Insurance Market of Iran

Introduction: Reclassification risk in the health insurance market happens when premiumprices are determined based on the health level. It is necessary for insurance applicants tomanage 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 takeninto account in calculating the premiums. This study is an attempt to calculate the welfarebenefits resulting from the coverage of this risk by providing guaranteed renewable insurancein this market.Methods: The economic welfare model in the form of computable general equilibrium hasbeen used to measure welfare. The model is calibrated by the data of social accounting matrixand 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 year. Results: The results show that, in general, the more guaranteed renewable insurance expandsin the health insurance market, the greater the welfare effects will be; therefore, the eliminationof basic insurance from this market and provision of the same insurance for all people in theform of guaranteed renewable insurance (complete elimination of reclassification risk) canincrease economic welfare up to 6%.Conclusion: Reclassification risk management by providing guaranteed renewable insurancein the health insurance market of Iran, due to increasing the welfare of the insured, will leadto the provision of a unit insurance plan and equal access to health services for all.