Stuart Buck's post on not insuring for small health expenses got me thinking again about why people have low deductible insurance and why one of the arguments against high deductible insurance is weaker than it seems.
The incentive alignment in health insurance is bad so why do people choose to use insurance for health expenses that they can afford. (I have a $10,000 deductible health insurance plan, partly because I want to minimize fighting with insurance companies.) one might argue that we have low deductible insurance because the
deduction is better if health spending is done through an employer but
that begs the question of why people would support such a tax situation.
My current explanation for why low deductible health insurance still dominates is that it gives people peace of mind, one less thing to worry about. Also when healthcare spending was just 5% of GDP it was a nice way for companies (or Governments) to that they cared.
It worked OK while health spending was below 10% of GDP but that peace of mind has become too expensive now that health spending is 18% of GDP. At 18% of GDP, we need individuals to make more of the spending decisions directly. The trade offs between spending on health care and other things can be very different for people. At 18% of GDP it is not even a sure think spending that much on healthcare increase health more that say buying a newer safer car or a gym membership or opting to work a lower paid but safer job.
One of the arguments that people will make against very high deductible insuracen is that when one is sick it is difficult to shop for price and that shopping for price is very difficult in health care but, the health care industry is not that as bad as people think in this regard because patients can have GP's who do very little of the expensive care themselves who can seek the best options on behalf of their patients. So even if the patient is too upset by the sickness to make the decisions himself they can have an advocate acting on their behalf.
I have had situations where Doctors have found much cheaper options for us after we have explained how much we will pay with our $10,000 deductible health insurance plan.