Abstract for: Financial Sustainability of Health Systems Dominated by Private Health Insurance
In the existence of individual choice among health insurance policies, individuals who expect high health care costs prefer more generous plans and those who expect low costs choose more moderate plans, and consequently the risk mix of insurance plans is deteriorated. Generous insurance plans are mostly affected from this adverse selection behavior of individuals. Moreover, individuals tend to overuse the available healthcare services when they are entitled to benefits by paying high premiums. These behaviors of individuals, profit concerns and other inefficiencies in the insurance market cause the premiums to increase and the insurance becomes unaffordable for some people, either because of their low income, or because of poor health. Those who become uninsured are no longer able to receive the necessary health care. Increased premiums deter the healthy people from buying insurance and this worsens the situation by deteriorating the risk mix further. In this study, a system dynamics model is constructed to represent the decisions of individuals, changing premium levels, and the resulting dynamics. The findings from model simulations confirm what exists in literature: The utilization tendencies and insurance choices of individuals, and companies' profit concerns cause escalating premium levels and large uninsured populations in certain cases.