I wondered aloud last week at the fact that I when I raised my annual health care deductible to $2500, my annual premium savings were over $3000. Which meant that from an economic standpoint, it was crazy to do anything but have a high-deductible health plan (even without considering the knock-on effects to the overall system of my now wanting to actually price shop for services).
TJIC offers one explanation that seems reasonable to me:
What kind of person is unwilling to pay the first $2,500 out of pocket? A person that intends to make lots of claims.
They know that they're going to use much of that first $2.5k.
Question: between one person who has no intention of going to the doctor for every little thing, and another person who does, let's assume that both get broken legs, which push them each to $5k in expenses "¦ which one is going to demand more follow up visits, cancel and reschedule more often, demand an extension on their course of painkillers, etc. ?
The one who was intending to use lots of service down at the low end, I'd wager my middle nut.
Three other possible explanations:
- As alluded to above, it is in the insurance company's interest to get their customers to start actively price-shopping for some medical services, so they encourage high deductible policies.
- Claims in the deductible range tend to be small and carry a disproportionately high overhead / processing cost as a percentage of the claim amount
- It is an economic IQ test, with results somehow correlated to attractiveness as a customer
This latter theory results from my experience at McKinsey & Co, a management consultant. When I joined, they offered a $5,000 one-year interest-free loan to cover relocation costs. As I became more senior and was responsible for hiring new consultants, some of them would come to me and say "that's OK, I don't need the money." I would look at them and respond, "we aim to hire the best young business minds in the country. If you turn down an interest-free loan, we may have to rethink our hiring decision. Go sock it in a 12-month CD like I did." My personal theory was the offer was really an IQ test, not a benefit.