MEASUREMENT OF RISK AVERSION AND ESTIMATION OF HEALTH INSURANCE PREMIUMS IN INDONESIA FOR COORDINATION OF BENEFITS SCENARIO

• Main Author: Grace Simanjuntak, Erica
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/76111
• Institution: Institut Teknologi Bandung

Catastrophic diseases require high costs and take a long time to treat. In Indonesia, catastrophic diseases can be covered by BPJS Kesehatan as national health insurance. It causes BPJS Kesehatan’s expenditure to swell. A coordination of benefit (CoB) scenario was introduced to reduce this significant expenditure. CoB is when two or more insurance companies cover the same individual. BPJS Kesehatan has implemented CoB through cooperation with additional health insurance (AHI). In the CoB scenario that has been implemented, AHI is only responsible for claims not covered by BPJS Kesehatan. However, the CoB scenario that has been running has yet to reduce BPJS Kesehatan’s expenditure significantly. Therefore, a modification of the CoB scenario involving BPJS Kesehatan and AHI was carried out directly through the concept of proportional reinsurance. In this scenario, BPJS Kesehatan will share the claim burden with AHI based on the proportion agreed by both parties. In determining the proportion of sharing, the utility of both insurance companies is considered to remain maximum. The results show that choosing a smaller AHI utility parameter will make the sharing proportion bigger. In comparison, the sharing proportion will be smaller by choosing a smaller BPJS Kesehatan utility parameter. It shows that the determination of premiums and the proportion of sharing in the CoB scenario can be adjusted to the preferences and needs of each insurance company. After that, in the concept of proportional reinsurance, the first insurance must pay a premium to the second. Therefore, modifications are made so that BPJS Kesehatan does not need to pay premiums to AHI and vice versa. However, insurance participants will pay two premiums simultaneously because they have two health insurance. This additional premium is a challenge for insurance companies in offering insurance products with CoB scenarios to the public. A measure of feelings that can guide participants in making decisions, called risk aversion, is needed to overcome this challenge. Previous research by Thomas (2015) recommended reluctance to invest as one of the essential variables in decision-making. The results showed that participants’ wealth influences their reluctance to invest and can affect decision-making. The greater a person’s wealth, the greater the reluctance to invest. Therefore, wealth and risk aversion can guide insurance companies in determining the target of insurance participants. Thus, implementing CoB scenarios in health insurance in Indonesia has the potential to be offered to the public.