The Health Insurance Shell Game

“The Health Insurance Shell Game.” By Nortin M. Hadler and Janet Schwartz, Scientific American.

The insurance industry had a rocky start a century ago. It was clear that there were untoward events that could befall any of us with catastrophic results, from the incineration of a home to the loss of the ability to maintain gainful employment from injury or death. Insurance offers a mechanism to share this risk. The stumbling block was the possibility that the insured might burn down their home to collect. Once it was realized that “moral hazard” could be held at bay by investigating for fraud, there was little to hinder the growth of an industry designed to serve our risk adverse proclivities.

The average employee has to decide on an insurance plan that hosts a dizzying array of fees and coverage: How much will you pay out-of-pocket before insurance kicks in (deductible)? What’s the maximum coverage (cap) if I get really sick? Is a million dollars enough? Two million? What about co-insurance?  What is co-insurance? Do co-pays count towards the deductible? What about tests? Answers to these and similar questions dramatically alter the monthly premium, which is not a trivial consideration for the average American employee.

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