Health Insurance Invites Waste
What if you had supermarket insurance and 20% was the most you would pay for any item you bought? Would you be as choosy about what you buy as you are now? Would you care as much about price? If you didn’t care as much about price, would the supermarket have an incentive to keep prices down?
Today, most people still expect their employer to pay for their insurance. They see it as an “extra” benefit. In reality, in a state like Colorado the policy will cost the employer more than 2x what a similar individual/family health insurance plan will cost, just because they aren’t underwritten. I would rather have a bigger salary and go shop for my own health insurance with the extra money.
Employer sponsored health insurance plans usually have low copays and low deductibles. And a lot of people still prefer to stay away from plans that don’t have copays or have a high deductible. They think that “insured” means “free”. I recently read that it costs a health insurance company $35 - $50 to process a $25 claim. That’s just wasteful.
Don’t get me wrong, it’s very important to have health insurance. However, it should be designed as an actual “insurance” product so people don’t see it as getting free benefits. Having higher deductible plans, like health savings accounts (HSAs) are a start. People with these type of plans have more of an incentive to shop the market for a better deal.
If more people get these type of health insurance plans and start shopping for their healthcare like they shop for groceries, the prices will soon get a lot more competitive and customer service will get a lot better.
tags: health insurance hsa
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Nov 30th, 2006 at 8:09 pm
[...] After writing about how health insurance invites waste, I came upon an article Ezra Klein wrote about the fact that even HSAs won’t help slow that waste. He makes a good point because the total exposures are usually the same. But once the out-of-pocket maximum is met, there is nothing to slow the wasteful spending after that. And the spending that comes after a deductible is met is much more significant than the ticky-tack test for strep throat or prescription for antibiotics - the stuff that is usually covered before the deductible on non-HSA plans. [...]
Dec 6th, 2006 at 3:15 pm
[...] And today, Michael Cannon of Cato @ Liberty came up with a great Cavalcade of Risk. The Colorado Health Insurance Insider made this edition with my previous article “Health Insurance Invites Waste“. Part of Mr. Cannon’s commentary on the article… I mostly agree. But if Jay can find a health insurance policy that “cost[s] the employer more than 2x what a similar individual/family health insurance plan will cost,” he either must be suuuuper healthy or have really sick co-workers. [...]