The Choice between Family and Individual Deductibles in Health Insurance

by Emmett B. Keeler, Daniel A. Relles, John E. Rolph

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A study of how the choice of deductible type affects the variance of insurance payouts. The authors present some theoretical results on the variance of plans for any family, and prove that if the coinsurance rate is zero, the variance of payments by the insured is higher with individual deductibles than with equivalent family deductibles. Data are derived from the CHAS-NORC 1970 Medical Expenditures Survey, and an adjustment model is developed that addresses the question: How different would expenses have been for uninsured (or insured) families if they had been insured (or uninsured)? The variance of payments by insured families remains higher with individual than with family deductibles in simulations based on these data and representative health insurance plans. However, family deductible plans have both advantages and disadvantages that must be balanced against one another.

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