There are two ways to change behavior – one is by punishing bad behavior and the other is by rewarding good behavior. The latter fosters trust. The former does not.
Healthcare has a trust problem, which has been exacerbated by the pandemic, that we can address by rewarding good behavior. Yet we continue punishing bad behavior. Only we do not call it a punishment, we call it something else – a deductible.
In insurance parlance, a deductible is a moral hazard – an incentive to guard against undue risk by deterring financially unsafe behavior. Car insurance requires a deductible to curtail unsafe driving practices. The idea being drivers – knowing that they would have no deductible to meet and receive full coverage for any damage incurred – would subsequently drive in more risky ways and presumably cause more car accidents.
Health insurance follows the same logic. Patients must pay a deductible before receiving coverage for clinical care. The idea is to prevent unnecessary utilization of healthcare services. But in reality, it is a punishment.
Patients now estimate the projected costs when seeking care, judging whether the care meets the figurative standard of, “is it worth it”? And when facing a medical emergency with an unmet deductible, patients find themselves punished with hospital bills. Deductibles are meant to be a deterrent, founded on the premise that patients will waste clinical resources unless incentivized not to.
This is no way to build trust. In fact, deductibles destroy trust. Patients now question the value of clinical care based upon the deductible instead of the care itself. It is no coincidence that physician offices are filled with patients in December and noticeably empty in January. Most deductibles reset on New Year’s Day. And with the change in the calendar comes a change in patient behavior – just not in ways insurance companies anticipated.
Patients are not being more cautious in the care they seek because of deductibles. They are evaluating the value of paying it when seeking care. And when patient decisions are less about clinical care and more about financial risk, trust deteriorates.
It then naturally follows that patients will be leery of trusting anything in healthcare. In the fee for service world of modern medicine, every clinical service has a fee, and every fee requires a deductible.
To restore trust, we must restructure patients’ relationship with finance. This begins by restructuring health insurance plans. Rather than punish bad behavior through deductibles, we must reward good behavior through dynamic premiums.
Premiums are the monthly fees insurance companies charge for coverage. They are normally fixed. But if we create health plans that adjust premiums based on patient behavior, then we shift the financial risk managed by insurance companies away from deductibles and towards premiums.
If a patient follows a strict diet and engages in low cost clinical services like telemedicine, then she should be rewarded with discounts on her premium. But if a patient eats unhealthily, abuses alcohol, and misses multiple primary care appointments only to find herself in the emergency department, then she should incur an up-charge in her premiums.
By shifting the financial risk of patient behavior away from deductibles, we remove a deterrent and replace it with positive reinforcement that comes from premium adjustments – we reward good behavior instead of punishing bad behavior.
Interestingly, dynamic premiums already exist for insurance policies in other industries, such as life insurance. Life insurers use data modeling to predict risk over time and adjust premiums dynamically alongside the changing behavior of the insured.
Health insurers can incorporate similar models. Healthcare is saturated with datasets, and health insurers have plenty of data to replicate similar policies based on dynamic premiums.
In fact, it may prove to be more profitable for insurers to develop models that accurately reflect patient behavior with insurance premiums. More importantly, it may restore trust by redefining how patients perceive cost in medicine.