Minimum Optimal Scale of the Self-Employed Health insurance Programs in Korea

Park, Gang Won; Lee, Jung Un; Kim, Hae Kyung; Moon, Ok Ryun

Abstract

The purpose of this study is to estimate the minimum optimal scale(MOS) of the self-employed health insurance associations. Considering the high proportion of operating expenses, the author have selected 254 regional health insurance associations from the 1990 Finance Report of the self-employed health insurance programs. both a quadratic function and a hyperbolic function were chosen for the analysis. The dependent variables are the average maintenance cost per insured person and per household, and the independent variables are the number of insured members and of household. The minimum optimal scale was obtained from the differentiation of the quadratic function. Major findings are summarized as follows: 1. The M.O.S. was calculated as 166,174 members (27,442 households) for the rural self-employed health insurance associations and 258,462 members (75,446 households) for the urban. Providing that both the rural and urban health insurance associations would e integrated, the M.O.S. be found to become 231,687 members (68,101 households) 2. Compared with the optimal minimum scale, the magnitude of the current health insurance association found to be much smaller, less than half of the optimal scale. 3. In order to reduce the operating cost, it is necessary to enlarge the operational scale of self-employed health insurance associations.