Offering comprehensive health insurance plans with low deductibles and co-pay in exchange for higher annual premiums seems like a good value for the risk averse, and a profitable product for insurance companies. But according to a forthcoming study in a leading scholarly marketing journal, the INFORMS journal Marketing Science, such plans can encourage individuals with chronic conditions to turn to needlessly expensive treatments that have little impact on their health outcomes. This in turn raises costs for the insurer and future prices for the insured.
Srinivasan (study co-author) noted that health insurance has unique challenges compared to autos and home insurance when offering a menu of insurance plans. Said Srinivasan,”People won’t go out of their way to get into accidents or burn their homes, simply because they have more comprehensive insurance, but they do tend to get more expensive treatments with more comprehensive coverage.”
This goes to the heart of the problem of treating medical care as an insurable risk. Consumers don’t necessarily see it that way, particularly when it comes to non-catastrophic care. Rather, the study suggests, they can view their medical plans like a menu of pre-paid care. The more generous the plan, the greater number of items and more higher priced treatments are on the menu for ordering. And worse, it reinforces the mindset that health can be bought through higher cost medical care.
As the study authors note, the findings point to a strong need for better health literacy among consumers so they choose medical care wisely based on value and most likely outcomes. I would add in lifestyle changes to alleviate chronic conditions most amenable to health promoting behaviors that might have prevented many chronic conditions from developing in the first place.
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