Major medical

There is an unwritten concept in insurance that says to self-insure as much as you can afford. In my early years in the business there was a very popular type of health insurance called major medical. It had a high deductible with a low cost. It was designed so that the consumer would pay out of pocket for most health care services and have a safety net to cover large expenses. These consumers would shop for their health care like they shopped for other services since they had to pay direct to the provider. The providers liked it because they got paid up front without having to wait three months for a check from the insurance company. For many low income people this was a burden since they might typically have to pay five or ten percent of their annual income to cover the deductible so they began to demand of their employers plans with lower deductibles and have the company pay part of the cost. These plans were reinforced through union negotiations and resulted in the typical plan with a small deductible, a small co-pay and a stop gap. As the third party payer, the insurance company, began to assume more of the cost the price of health care services began to rapidly rise. Obamacare has reversed this process by offering plans with high deductibles and lower cost with the added advantage of having the government subsidize low income people by covering the cost of deductibles and premiums so they have health care at no cost to them. For those whose incomes are high and are not eligible for subsidies these new plans closely resemble the old style major medical.