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Why does it make less sense to insure price sensitive treatments than it does to insure...

Why does it make less sense to insure price sensitive treatments than it does to insure other types of treatments?

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Answer #1

The demand for the price sensitive treatment is elastic in nature. A higher price of the treatment makes the person to opt for other alternative treatment plans as he or she has to pay the copayment charges also. Hence, payment of premium, paid by the consumer is lost as no claim takes place. Hence, the insurance of these types of treatment, makes less sense. Though, price insensitive treatments are the plans for that consumers will opt for, irrespective of the increase or decrease in the price. As a result, the demand for such treatment plan, is inelastic in nature. For such plans, taking an insurance is a good strategy as chances of taking a claim is higher and it saves the patient from paying the high cost of treatment.

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