Factors influencing the demand for individual voluntary private health insurance in Iran

Abstract

Background

Financial risk protection is one of the main goals of healthcare systems worldwide and prepayment system plays an important role to achieve it. There are some prepayment schemes, and Individual voluntary private health insurance (IVPHI) as a way can be affected by some variables.

Objective

This study aimed to investigates the factors affecting the purchase and selection of IVPHI coverage in Iran.

Methods

This study used secondary data from a private insurance company in Iran, collected in 2023. Data were retrospectively gathered via an online questionnaire covering demographics, health status, and lifestyle factors used to assess risk for voluntary health insurance plans. Individuals with high-risk profiles were referred to the company’s physician for a clinical examination, after which they were categorized into high-risk or low-risk groups. The insurer then decided whether to approve the purchase of individual supplementary health insurance (ISHI). After data extraction and cleaning, a multivariate logistic regression model was used to identify determinants of voluntary health insurance purchase.

Results

Most ISHI sales occurred in low-deprivation provinces (71%), with women (64%) and those aged 26–49 (70%) more likely to purchase. Higher coverage (Plan 4) was preferred across all age groups. Key factors influencing ISHI purchase included health status, basic insurance, and region, with moderate deprivation areas showing higher demand for higher coverage plans.

Conclusion

The findings emphasize regional, demographic, and health status disparities in ISHI purchases. Policymakers should focus on improving access to higher coverage plans, especially in more deprived areas, to ensure equitable insurance distribution.

Introduction

Financial risk protection is one of the main goals of healthcare systems worldwide [1], and prepayment schemes open the way to achieve this goal [2]. In this regard, universal health coverage (UHC) is considered a strategic means of global health [3, 4]. UHC is the goal that involves fair access to high-quality services and ensuring financial protection for health purposes [3]. Despite 75% of national health policies worldwide moving towards UHC, the World Health Organization (WHO) announced in 2022 that half of the world's population still lacks access to essential healthcare services [5].

At a global level, statistics show that 150 million individuals experience catastrophic health expenditures, and approximately 100 million people are pushed below the poverty line by health spending, of which 90% are in low-income countries [6]. The unpredictable nature of health issues means that healthcare costs entail risks [7], and risk pooling mechanisms through savings funds, national, social, private, and publicly financed health insurance are different methods to reduce this risk [2, 8]. Studies show that insurance is the best mechanism of financial risk protection and recovering the value of losses [9, 10].

In other words, health insurance controls healthcare costs through risk pooling and provides financial protection [5, 7], ensuring that standard living standards are met by mitigating the financial risks of healthcare expenses through full or partial payment of healthcare services [11,12,13]. In Iran, basic insurance coverage is provided by the government through three main insurances: the Social Security Insurance Organization (SSIO), the Health Insurance Organization (HIO), and the Armed Forces Medical Services Insurance Organization. Prior to 2017, health insurance was administered by the Ministry of Cooperatives, Labor, and Social Welfare, but based on a decision at the time, it was transferred to the Ministry of Health along with financial independence [14, 15].

Health insurance has been much more prominent in in the country for low-income groups who cannot benefit from the advantages of insurance, while social Security sets premiums primarily based on wages [1], and Armed Forces insurance covers individuals in the Ministry of Defense. Basic insurance covers a range of essential benefit packages declared by the Ministry of Health [16]. Studies have reported that basic insurance coverage is not comprehensive enough to meet all the needs of insured individuals [17,18,19].

Despite the fact that basic insurance typically provides uniform coverage to 95% of the population, around 89% of services are not covered by this insurance, resulting in a financial burden on households in some countries [8, 12]. Insufficient coverage of basic insurance services and the exclusion of certain self-employed groups will cause people to pay more costs out of pocket or to purchase supplementary insurance [16, 20]. Most people opt for supplementary insurance to ensure better financial protection and more comprehensive service coverage. However, it is important to note that enrollment in these insurances is completely voluntary [21]. Research has indicated that the demand for supplementary health insurance may reflect dissatisfaction or inefficiency with basic insurance [22, 23]. Many people consider the lack of support for these insurances alongside basic insurance as a risk for increasing unnecessary healthcare costs [24].

In Iran, supplementary health insurance (SHI) is provided by various private and public entities. The Iran Health Insurance Organization plays a significant role in managing and regulating these services. Private companies also offer supplementary insurance to fill gaps not covered by basic medical insurance schemes. SHI covers services not included under basic medical insurance, such as specialized treatments, advanced diagnostic tests, and access to private healthcare facilities. These policies often provide benefits like reduced waiting times for procedures and better quality care compared to what is available through compulsory social insurance schemes [25, 26].

The development of supplementary health insurance in Iran has seen growth, with a notable increase of 34.6% reported in recent years. However, challenges persist due to limited affordability among lower-income populations and structural issues within the current healthcare system [26].

In Iran, access to supplementary insurance is possible through group and recently individual enrollment in certain insurance companies [17]. Group policies offer better risk pooling compared to individual ones [17], but overall, adverse selection and moral hazard considerations may occur due to an asymmetry of information [16, 24]. Both moral hazard and adverse selection predict that risk-averse individuals are more likely to seek insurance and purchase higher levels of coverage [27, 28]. Therefore, from a public policy standpoint, access to the sufficient amount of information about the characteristics of individuals seeking voluntary health insurance is crucial [29]. There is a vast body of scientific literature on factors affecting the demand for health insurance worldwide, which varies depending on the particularities of each country. The relationship between the three main variables of the Grossman model—age, income, and education—is one of the basic theoretical models in this field [29]. There are a number of contributing factors in the choice of supplementary health insurance which have been examined in previous studies. These factors include wealth or income, education levels, age, marital status, residency status, access to information, gender, health status, race, number of employed members, out-of-pocket payments, occupation, and number of children [1, 23, 29,30,31,32,33,34,35,36,37,38,39,40,41].

Most studies in the field of voluntary health insurance have been conducted in developed countries [29, 36,37,38,39,40,41], with limited research in developing countries, especially regarding ISHI. Nosratnejad and colleagues (2016) examined the factors influencing the demand for health insurance (basic and supplementary) and found that increasing age, education, non-linear income, wealth, and opportunities for being employed in governmental sectors increase the probability of purchasing basic health insurance (BHI) and community health insurance (CHI) coverage [42]. Another study in 2014 revealed that household heads with higher education levels, income, and job opportunities have a higher willingness to pay for health insurance [43]. To the best of our knowledge, factors contributing to purchase of ISHI in Iran remain understudied and incompletely understood, this research investigates the factors affecting the purchase and selection of ISHI coverage in Iran. This study is the first in Iran aiming to shine new light on the characteristics of individuals seeking to purchase and select ISHI coverage.

Materials and methods

The current study was conducted based on the data series taken from ISHI, a private insurance company in Iran in 2023. Data for this study were retrospectively collected using an online questionnaire, covering demographic characteristics, health status, and lifestyle factors used by the insurance company to assess the risk information of the population purchasing voluntary health insurance. After completing the questionnaire, individuals with relatively high-risk profiles were referred to the insurance company’s physician for a comprehensive clinical examination. Physical examinations were performed by physicians to categorize enrollees into high-risk or low-risk groups, and then the insurer decides whether to approve the individual’s request to purchase ISHI policies. Information on 7003 enrollees was obtained from insurance company databases between December 2021 and December 2022. After reviewing the existing literature, variables influencing the choice of purchase and coverage selection for voluntary health insurance were identified and selected.

The dependent variable in this study is the type of ISHI scheme, which, considering the high diversity of schemes in terms of insurance premium, coinsurance, and coverage level, was subdivided into four groups based on the level of coverage for individuals' medical expenses. Group 4 had the highest coverage, while Group 1 had the lowest coverage for medical expenses. The independent variables in this study include the level of deprivation in the province of residence, gender, age, lifestyle, base insurance, family health history, and health status, as well as health expectations.

To assess the level of deprivation in the provinces of individuals' residence, the existing literature was examined, and ultimately, the systematic review by Kazemi and Amiri was used [44]. To examine the healthy lifestyle status of applicants, two questions regarding smoking and exercise were asked. In this study, the lifestyle variable was classified into three categories: poor lifestyle (individuals who smoke and do not exercise), good lifestyle (individuals who do not smoke and exercise), and moderate lifestyle, which includes other cases. Regarding the family health history of the applicants, they were asked about the occurrence of first-degree relatives' diseases such as tuberculosis, cancer, heart disease, hypertension, diabetes, renal failure, stroke, and congenital diseases, to which they responded with yes (1) or no (0). Additionally, they were asked about their health expectations: “Have you been diagnosed with the need for any surgical procedure by your physician in the next year?” This variable was also included in the study as binary (0 and 1). The health status of ISHI applicants was assessed through a series of 8 questions. These questions included developing a disease or condition that prevents them from performing their daily activities for more than two weeks, a history of loss of appetite or weight loss of more than 10 kg in the past year, lower back pain or discomfort in the neck area, joint problems, long-term use of a specific medication, a history of hospitalization or nursing home stay for more than two weeks, HIV/AIDS status, Hepatitis B or C tests, a history of schizophrenia, bipolar disorder, or a tumor or cancer. Two specific questions were asked of females to assess their reproductive health status (infertility and history of breast cancer). The phrase “In case of any false answers being discovered, the individual's insurance contract will be voided and legal action will be taken against the offender” was also mentioned at the beginning and end of the questionnaire to encourage applicants to answer the questions honestly.

In this study, since the dependent variable was considered as an ordinal variable for insurance purchase schemes, the ordered Logit model was used to examine the factors influencing the purchase and selection of ISHI coverage. This type of model is used in surveys where respondents' preferences are classified in an ordinal ranking. Logistic regression models can be explained using the cumulative distribution function. In these types of models, the observed responses are modeled through a latent variable y* that is linearly related to the explanatory variable x:

$${{{\varvec{y}}}^{2}=({\varvec{x}}{\varvec{\beta}})}^{2}+\varvec{\varepsilon }$$

(1)

where x is a k × 1 vector of explanatory variables, β is a k × 1 vector of estimated parameters, and ε is a random variable representing stochastic errors that are normally distributed with a mean of zero and a variance of one. Data used in these analyses were derived from the insurance company’s databases. Statistical analyses were performed using Stata 15 (STATA Corp.) and ArcMapGis software.

Results

According to the results, 71% of ISHI sales in provinces with low deprivation levels, and 7% of sales in provinces with high deprivation level have been made. It seems that the preference for high ISHI coverage is evident in all levels of deprivation in provinces. The chi-square coefficient in this variable indicates the correlation between the type of ISHI schemes and the level of development in the province. Women (64%) were more likely to purchase ISHI than men (36%). Additionally, 70% of ISHI buyers are in the age group of 26–49, and in all age groups, Plan 4 had the maximum number of applicants. People with basic insurance (99%) constituted the majority of ISHI buyers.

One percent of the population had a healthy lifestyle, and 2% had an unhealthy lifestyle, but no significant impact of the lifestyle on the type of ISHI scheme was observed. According to descriptive statistics, 93% of ISHI buyers had no hereditary diseases, while 7% had a history of hereditary diseases. Furthermore, buyers were categorized into three health status groups: good health (90%), poor health (less than 1%), and average health (8%). As a self-assessed health variable, 99% of ISHI buyers claimed that they did not need any surgical procedures or health interventions requiring hospitalization in the next year as prescribed by their physician. Moreover, 95% of women had no health problems, but 5% of them had a medical history of breast cancer and infertility. (Table 1).

Table 1 Characteristics and Descriptive Statistics of Participants

The results in Table 2 show that Tehran (31%), Isfahan (9%), and Fars (7%) have the highest percentages of ISHI purchases among the provinces. On the other hand, West Azerbaijan, Kerman, Chaharmahal and Bakhtiari, Hamadan, Kermanshah, Kohgiluyeh and Boyer-Ahmad, Zanjan, Sistan and Baluchestan, South Khorasan, Kurdistan, Ilam, and North Khorasan have the lowest percentages (less than 1%) of purchases. Of all the schemes 1 to 4, the ISHI purchasing rate was highest in plan 4 (57%), followed by plan 2 (21%), plan 3(13%), followed by plan 1 (9%). A significant correlation was found between provinces and the selected scheme type. Distribution of health insurance purchases among the provinces has been represented on the map below. (Table 2 and Fig. 1).

Table 2 Geographic Distribution of ISHI Purchases by Insurance Plan in Iran

Fig. 1

Distribution of ISHI purchases by province

The findings of our analysis indicate that people residing in provinces with moderate deprivation levels are more likely to purchase ISHI compared to those in provinces with lower deprivation levels. In other words, more deprived provinces had a lower probability of purchasing ISHI Plan 4 (the highest coverage). This variable was statistically significant at a 95% confidence level in both models (OR = 0.77, p-value < 0.01). Men had a lower chance of purchasing ISHI with excess coverage compared to women (OR = 0.75, p-value < 0.01). Furthermore, our analysis demonstrated that all age groups had a higher chance of demanding a package with higher coverage compared to the baseline age group (0–16 years).

The higher levels of coverage were purchased more by individuals with basic insurance (OR = 3.2, p-value < 0.01), individuals with moderate health status compared to healthy individuals (OR = 1.28, p-value < 0.01), and women suffering from health problems compared to their healthy counterparts (OR = 1.34, p-value < 0.01). Individuals who expected to require a clinical intervention in the next year chose lower coverage ISHI plans compared to those who did not expect it (OR = 0.56, p-value < 0.01). Individuals with a history of hereditary diseases are less likely than healthy ones to purchase ISHI with higher coverage (0.12 > OR = 0.86, p-value), although the relationship between this variable and lifestyle was not statistically significant (p-value > 0.05). In addition, the logistic regression coefficient indicated the goodness of fit of our parametric specification in both models (p-value < 0.01). (Table 3).

Table 3 Results of logistic regression analysis for factors influencing the purchase of ISHI

Discussion

In many countries, a significant proportion of the population takes steps to purchase supplementary insurance coverage along with basic insurance in order to have excess healthcare coverage. While supplementary health insurance has become fairly widespread in Iran, no single study exists that has adequately examined the factors influencing the purchase of ISHI (Iranian Supplementary Health Insurance). This study was conducted for the first time to identify the factors that influence the purchase and selection of ISHI coverage. The results indicate that three provinces (Tehran, Isfahan, and Fars) accounted for a total of 47% of ISHI purchases, while each of the remaining 13 provinces did less than 1% of purchases. The highest and lowest proportion of ISHI purchases belonged to Plan 4 and Plan 1, respectively. The majority of ISHI was purchased in provinces with lower levels of deprivation. This could be attributed to the fact that households in more developed provinces have higher average incomes and better access to healthcare facilities.

According to the results, more women than men purchased ISHI coverage. This could be due to the presence of relatively strong risk-averse preferences in women compared to men [45], as more risk-averse individuals are more likely to purchase insurance [28, 46]. In other words, women prefer to purchase insurance to protect themselves from potential future healthcare expenses. However, both groups selected ISHI plans with high coverage levels. Different age groups have shown varying preferences for purchasing ISHI, with the middle-aged group (26–49 years) demonstrating the highest demand for this insurance. This can be attributed to their active participation in the workforce and their greater purchasing power [47]. Middle-aged individuals have also to invest in supplementary health insurance, as supported by shown a higher willingness previous research[23, 30, 33, 48]. However, the company's policy of not supplying insurance to individuals over 69 years old significantly influences this finding. Furthermore, studies have suggested that young people tend to be more risk-averse [23], as a result, they are less willing to purchase health insurance. In contrast, middle-aged individuals, feeling the effects of aging more, seem to be more willing to purchase coverage. In addition, most ISHI purchasers are individuals with comprehensive basic insurance (99%), and their likelihood of purchasing ISHI is 3.2 times higher than those without basic insurance, showing a statistically significant difference. However, this difference may arise from the company’s rejection of individuals without basic insurance. If an applicant has basic insurance, the company will cover a portion of their healthcare expenses (30% in private centers and 70–90% in government centers), making it advantageous for the company to provide ISHI coverage only to individuals with basic insurance.

While previous studies have reinforced the impact of health status on the purchase of supplementary health insurance, a conclusively empirical relationship has not been established [23, 49]. The study findings indicate a direct correlation between health status (history of disease) and the demand for IVPHI, with individuals in better health purchasing more ISHI, a finding supported by Tavares [50] and Doiron et al. [28] Despite examining various models in a study by Saliba, no data was found on the association between health status and the purchase of supplementary insurance [51]. Boulin and his associates investigated the relationship between health status and the likelihood of using voluntary health insurance in the United States and European countries, in which the authors found a negative correlation between health status and the probability of utilizing voluntary health insurance [29].

In the current research, a healthy lifestyle refers to non-smoking and physical activity, while an unhealthy one refers to smoking and lack of physical activity. 97% of individuals who had purchased health insurance fell in the moderate group (non-smoking and exercising). Nevertheless, studies show a direct and indirect correlation between a healthy lifestyle and the willingness to purchase ISHI [52]. In the second model of this study, the main independent variable, which was women's health status, indicated that the purchase of ISHI is higher among women who stated that they had no health problems compared to women with health problems. In other words, this model also demonstrated that healthy individuals purchase more ISHI compared to those who are less healthy. Certain limitations of the study must be noted when interpreting the findings:

• Since the information of only individuals who have purchased insurance is registered in a database system of insurance, lack of access to information of individuals excluded due to reasons such as being high risk is one of the limitations of the study.

• The data is self-reported and may contain some systematic errors, self-censorship, or dishonesty by the respondents.

• Due to the lack of recording insurance purchasers’ income, the current study was unable to analyze this important variable.

• This study is limited in terms of measuring self-censorship and lack of honesty in responding to applicants' questions.

Conclusion

Insufficient coverage by basic insurance has led to the emergence of supplementary insurance markets in many countries to provide services beyond basic coverage.

Supplementary insurance companies, aware of asymmetric information, risk magnitude, and the probability of induced demand and moral hazard in the ISHI market have always entered this market cautiously and primarily sell group health insurance premiums and policies. However, recently, Iranian private insurance companies have started selling ISHI, which was the focus of this study in examining the characteristics of ISHI purchasers. The majority of purchasers were from developed provinces, women, the middle-aged group, and individuals with good health status. Overall, the entry of supplementary insurance companies into the ISHI market entails more risk, and it is recommended to consider the characteristics of ISHI purchasers for improving future ISHI sales.