Sensible Health Insurance - Part 2

Nov 11, 2004

In addition to providing levels of coverage to match various balances of cost and available choices, it's desirable to match cost to the insured's desired exposure. There are three “pay for use” factors to adjust, the deductible, which means that the insured pays all of the first part of the annual cost, and the copay which is paid on a per-use basis after the deductible is met. In addition an annual maximum out of pocket limit sets an upper limit on the cost of bad health.

The basis for choice of deductibles is based on the insured's risk tolerance. If a person is young and in good health, particularly if there is discretionary income, choosing a high deductible will reduce premium cost, but increase out of pocket if bad health strikes. In that case the insured will have to cover a large initial deductible cost before coverage begins. That's the kind of choice no one can make for you, and it should be available. Of course in the long run the premiums have to cover the cost, so the plan is fair to all insured. I will influence the value of the maximum out of pocket cost, although the maximum has to be within the means of the insured, so there's a limit to raising it.

Looking at custodial care information, I believe it would probably cost little to cover custodial care after the first year, since most patients in custodial care with serious illnesses tend to have a short lifespan. This would give protection for the patient who requires years of care, while leaving responsibility for the majority of the cost to the patient and family. And by negotiating the cost of long term care, the total impact of long term care would be reduce, which would reduce the coverage cost for elderly residents who are feeble but have no life threatening illness. Clearly there needs to be provision for home care coverage, since that's much less costly than residential care.

There's another factor to consider about long term care. When the long term coverage is provided by the same carrier, there is a major cost saving to rehabilitation rather than long term care. That's good for the health care system and far better for the patient. It also probably makes selective investment in new treatments cost effective, since making people well is less costly than long term care. For that reason I feel that it would be desirable to bundle long term health care with all plans but the basic minimum cost alternative. It's a win for the insured and the overall cost of care, and provides a reward for developing better treatments for the most costly illnesses and conditions.