Infinite Deductible
I have an idea for a start-up medical insurance company for Massachusetts. My insurance will have an infinite deductible. That means you pay your own bills. The cost of insurance can be very low, say $100 a year, as I do not need to do anything other than to send you a letter confirming that you have medical insurance. People who otherwise will be fined up to $900 for being uninsured will run in droves to buy my insurance.
I have an even better idea. For an extra fee, I will negotiate with doctors so that you will pay the same amount as medical insurance companies pay to them, which is often three times less than you would pay on your own.
Who am I kidding? I am not a business person, I can’t build a company. But I am looking to buy the insurance I just described.
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Bob:
I’ll take that trade.
28 October 2011, 10:30 amfriendly reader:
I love the idea, but the only problem with it is passing the “risk of loss” test. In order for companies to sell something called “insurance” there has to be a risk of loss to the policy holder which the insurance company covers. In the infinite deductible case, there’s no risk of loss. When I was right out of graduate school and working as a consultant in the insurance industry (not health insurance) I bought the BCBS policy with the highest available deductible. The deductible was thousands… maybe $5K. I would have bought a $10K deductible if they had sold it. My main motivation was getting the insured rates on services/meds.
So an infinite deductible product can’t be called “insurance” but maybe you can find a very large deductible plan that works.
28 October 2011, 12:38 pmL33tminion:
You couldn’t do that under MA law, which mandates that insurers limit out-of-pocket spending to $5000 per individual and $10,000 per household.
And how would you negotiate for lower prices without shielding the doctors and hospitals from financial risk? Doctors and hospitals don’t offer lower prices to the insurance companies without getting anything in return.
28 October 2011, 1:33 pmmisha:
Visit e-club at MIT and talk it over.
3 November 2011, 11:31 pmSplunge:
I could swear that when I was visiting Washington State, I saw a TV ad for exactly this, although they didn’t say “infinite deductible insurance,” they just said “subscribe to our service and get those great prices that the insurance companies get.”
I’ve been without insurance myself, and had to actually pay those insane official prices, so I’d sign up in a heartbeat.
What I’ve heard is that those official prices are dictated by some sort of Medicaid rule that requires massive discounts from the official prices when billing the government, so you have to make up a fake price and actually charge people that, in order to be in compliance with what the Government dictates.
9 November 2011, 4:09 amAaron F.:
What I’ve heard is that those official prices are dictated by some sort of Medicaid rule that requires massive discounts from the official prices when billing the government, so you have to make up a fake price and actually charge people that, in order to be in compliance with what the Government dictates.
Have you got a reference? The only examples I can find of such a rule are in Medicaid’s prescription drug buying and Medicare’s coverage gap drug discount. Notice that, if I understand correctly, these two rules apply only to prescription drugs—not to medical tests, services, devices, and things like that.
18 November 2011, 2:50 am