Car Insurance : Signing on the dotted line after accepting the payment of a car is not the end of the vehicle costs. The important price of car insurance must always be taken into account in a monthly budget for transport, but as evidenced by new research, it is increasingly expensive to ensure a wheelset.
Motus' investigation discovered the fact that, on average, car insurance premiums have increased every year since 2013, and since 2011, insurance premiums have increased a huge 23%. Although numerous factors can affect a person's insurance premium, the overall picture has also changed.
The data supports the fact that insurers are paying more frequently than before. When that happens, insurance companies increase rates to compensate for losses. In the United States, the number of car accidents has increased in this decade, even though traffic accident deaths continue to decline. Add the mixed bag to safer cars than ever. Pedestrian deaths, meanwhile, continue to rise.
It is not just an increase in accidents, but natural disasters such as floods, hurricanes and forest fires can provide a wave of unsuspected claims for these companies. In turn, rates increase. And when the time comes to pay for repairs, it also becomes much more expensive.
As an example, the investigation analyzed what it would cost to repair a 2010 Chevrolet Malibu after a frontal collision. Nine years ago, the work cost $ 1,652 on average. Today, a 2018 Malibu for identical repairs would return a repair bill of $ 3,627 on average. The average cost of repair after a car accident reached $ 3,053 last year.
Two factors have led to the progressive rise in repair costs. Motus discovered that the abundance of crossover SUVs along the way contributes to higher costs. These vehicles are more expensive than the now unpopular sedan body style. However, the biggest contributor is technology.
While the active safety features undoubtedly make the units safer, these sensors, parts and computers have a cost. When it's time to replace and repair them after a crash, drivers are seeing higher costs. On average, there has been a 23% increase in the number of parts needed when making repairs. More parts equals more money, and these parts are not always cheap.
The picture is not exactly rosy. The increase in technology used in cars will likely continue to make repairs even more expensive when necessary, and if Americans continue to contribute to an increasing number of vehicle accidents, insurance will continue to be a large financial part of car ownership. vehicle.
Multiple studies show that despite the high financial and medical risks, many people make objectively poor health insurance decisions. In a 2015 study, three behavioral economists analyzed the insurance options of 50,000 workers in a Fortune 500 company that offered its employees a menu of health plan options: workers could mix and match features such as deductibles, co-payments and out of maximum out-of-pocket payments, with the result that 48 different plans were possible. More than half of these employees ended up choosing plans that were objectively worse than the alternatives. They decided to pay $ 500 more in premiums, for example, to reduce their deductible by $ 250. As a result of wrong choices, the average person unnecessarily spent the equivalent of 2 percent of their salary, and low-income patients, women, the elderly and chronic patients spent even more.
Similarly, in 2015, a couple of MIT economists analyzed the insurance options of millions of people who decided on Medicare plans to cover drug costs. Medicare Part D offers basic drug coverage through private plans that offer a range of premiums, co-payments, etc. Again, sometimes there are objectively correct decisions in these cases: people who take specific medications should choose plans that generously cover those treatments. In this case, however, only 12 percent of the people chose the best plans for their circumstances, and the average person spent 24 percent more on medications than they would have spent on an available alternative plan.
To understand why the financial viability of ACA insurance plans is based on bad decisions, imagine what would happen if everyone made good decisions. Consider two plans that an insurer could offer in an exchange. One is a low monthly premium plan with high deductibles, the other is a higher premium plan with low deductibles. All things being equal, people with expensive chronic illnesses should choose the low deductible plan, paying more each month in premiums to avoid high out-of-pocket costs for the medical care they know they will need. On the contrary, relatively healthy people should gravitate towards the first plan, saving money every month and assuming a calculated risk that they never get sick enough to be responsible for the total cost of their deductible.
However, if a high premium and low deductible plan attracts an increasing number of people with costly chronic conditions, the insurance company will be forced to increase monthly premiums so that the plan survives financially. That will make even more relatively healthy people switch to the high deductible plan. The result will be another round of premium increases for the low deductible plan and a greater escape from healthy consumers.
This is the dreaded spiral of death, which ends in an insolvency plan. And it would happen much more often if people made the most efficient insurance decisions for themselves and their families.
Why do people make insurance mistakes? One problem is opaque terminology. In a context of normal consumption, the word "deduct" suggests a bargain (wouldn't you like your car dealer to "deduct" $ 2,000 from the list price?). But an insurance deductible of $ 2,000 means that your insurance will not cover your expenses until you have spent $ 2,000 out of pocket on medical care. In a nationally representative survey of Americans with private insurance, more than 1 in 5 could not define "deductible" (although 97 percent were confident in knowing the answer). In that same study, almost half were confused about the meaning of the term "maximum out-of-pocket cost": the total paid in deductibles and co-payments before an insurer takes over the total coverage of one person's expenses for the rest of the year.
There is also an information overload, which aggravates the problem. Monthly premiums, copayments, in-network versus out-of-network deductibles, medication plans: who more than an actuary can make a wise decision when faced with a dozen plans that vary in these dimensions?
The Medicare systems for all proposed by Senator Bernie Sanders (I-Vt.) And (at a slower schedule) Warren solve the problem in one way: people would no longer make bad insurance decisions because they would no longer have insurance options. Everyone would receive coverage from a single plan, regardless of how healthy they are; No one with chronic diseases would be excluded from the market.
But other candidates and voters oppose that approach, either because they think it is politically unfeasible or simply a bad policy. If they stick to the ACA and private plans, they should make it much easier for people to select plans that make more sense to them.
The radical simplification of the plans could mean that Congress would require that all plans in the ACA exchange have the same deductible. Based on research that suggests that deductibles discourage people from receiving the necessary care, I would prefer that this uniform deductible be small or nonexistent.
That does not mean that ACA reviews should eliminate all out-of-pocket costs. Well-designed copays can make people less likely to seek unnecessary medical interventions. Ideally, Congress would press for coverage based on the idea of reducing co-pays for necessary and high-value services (such as statins, for people with a history of heart disease), while increasing co-pays for dubious medical care. Value (such as magnetic resonance imaging (MRI) for simple low back pain), an approach known as "value-based insurance design."
Insurance options would still exist. For starters, the plans would differ in cost, with some insurance companies achieving lower premiums by negotiating lower prices with suppliers and others cutting expenses by reducing their operating margins. The plans would also differ according to the services they offer to members (such as dental or broader vision coverage), the network of providers they offer or even the programs they develop to promote the health of their clients.
Such reviews would not eliminate all confusion, and educating consumers would remain important. But crucially, the survival of the system, the avoidance of a death spiral, would no longer depend on the self-destructive choices of confused consumers. That would reduce the incentive to confuse people.
The goal of insurance should not be to trick healthy people into buying expensive plans that they don't need. A good insurance system should provide affordable coverage for everyone, whether they are sick or healthy, without confusing daylight.
Motus' investigation discovered the fact that, on average, car insurance premiums have increased every year since 2013, and since 2011, insurance premiums have increased a huge 23%. Although numerous factors can affect a person's insurance premium, the overall picture has also changed.
The data supports the fact that insurers are paying more frequently than before. When that happens, insurance companies increase rates to compensate for losses. In the United States, the number of car accidents has increased in this decade, even though traffic accident deaths continue to decline. Add the mixed bag to safer cars than ever. Pedestrian deaths, meanwhile, continue to rise.
It is not just an increase in accidents, but natural disasters such as floods, hurricanes and forest fires can provide a wave of unsuspected claims for these companies. In turn, rates increase. And when the time comes to pay for repairs, it also becomes much more expensive.
As an example, the investigation analyzed what it would cost to repair a 2010 Chevrolet Malibu after a frontal collision. Nine years ago, the work cost $ 1,652 on average. Today, a 2018 Malibu for identical repairs would return a repair bill of $ 3,627 on average. The average cost of repair after a car accident reached $ 3,053 last year.
Two factors have led to the progressive rise in repair costs. Motus discovered that the abundance of crossover SUVs along the way contributes to higher costs. These vehicles are more expensive than the now unpopular sedan body style. However, the biggest contributor is technology.
While the active safety features undoubtedly make the units safer, these sensors, parts and computers have a cost. When it's time to replace and repair them after a crash, drivers are seeing higher costs. On average, there has been a 23% increase in the number of parts needed when making repairs. More parts equals more money, and these parts are not always cheap.
The picture is not exactly rosy. The increase in technology used in cars will likely continue to make repairs even more expensive when necessary, and if Americans continue to contribute to an increasing number of vehicle accidents, insurance will continue to be a large financial part of car ownership. vehicle.
The health insurance system would collapse if everyone chose the right plan
A central objective of the restructuring of medical care should be the radical simplification of insurance options, so that people do not mistakenly choose plans that cost them thousands of dollars more than necessary each year.
Multiple studies show that despite the high financial and medical risks, many people make objectively poor health insurance decisions. In a 2015 study, three behavioral economists analyzed the insurance options of 50,000 workers in a Fortune 500 company that offered its employees a menu of health plan options: workers could mix and match features such as deductibles, co-payments and out of maximum out-of-pocket payments, with the result that 48 different plans were possible. More than half of these employees ended up choosing plans that were objectively worse than the alternatives. They decided to pay $ 500 more in premiums, for example, to reduce their deductible by $ 250. As a result of wrong choices, the average person unnecessarily spent the equivalent of 2 percent of their salary, and low-income patients, women, the elderly and chronic patients spent even more.
Similarly, in 2015, a couple of MIT economists analyzed the insurance options of millions of people who decided on Medicare plans to cover drug costs. Medicare Part D offers basic drug coverage through private plans that offer a range of premiums, co-payments, etc. Again, sometimes there are objectively correct decisions in these cases: people who take specific medications should choose plans that generously cover those treatments. In this case, however, only 12 percent of the people chose the best plans for their circumstances, and the average person spent 24 percent more on medications than they would have spent on an available alternative plan.
To understand why the financial viability of ACA insurance plans is based on bad decisions, imagine what would happen if everyone made good decisions. Consider two plans that an insurer could offer in an exchange. One is a low monthly premium plan with high deductibles, the other is a higher premium plan with low deductibles. All things being equal, people with expensive chronic illnesses should choose the low deductible plan, paying more each month in premiums to avoid high out-of-pocket costs for the medical care they know they will need. On the contrary, relatively healthy people should gravitate towards the first plan, saving money every month and assuming a calculated risk that they never get sick enough to be responsible for the total cost of their deductible.
However, if a high premium and low deductible plan attracts an increasing number of people with costly chronic conditions, the insurance company will be forced to increase monthly premiums so that the plan survives financially. That will make even more relatively healthy people switch to the high deductible plan. The result will be another round of premium increases for the low deductible plan and a greater escape from healthy consumers.
This is the dreaded spiral of death, which ends in an insolvency plan. And it would happen much more often if people made the most efficient insurance decisions for themselves and their families.
Why do people make insurance mistakes? One problem is opaque terminology. In a context of normal consumption, the word "deduct" suggests a bargain (wouldn't you like your car dealer to "deduct" $ 2,000 from the list price?). But an insurance deductible of $ 2,000 means that your insurance will not cover your expenses until you have spent $ 2,000 out of pocket on medical care. In a nationally representative survey of Americans with private insurance, more than 1 in 5 could not define "deductible" (although 97 percent were confident in knowing the answer). In that same study, almost half were confused about the meaning of the term "maximum out-of-pocket cost": the total paid in deductibles and co-payments before an insurer takes over the total coverage of one person's expenses for the rest of the year.
There is also an information overload, which aggravates the problem. Monthly premiums, copayments, in-network versus out-of-network deductibles, medication plans: who more than an actuary can make a wise decision when faced with a dozen plans that vary in these dimensions?
The Medicare systems for all proposed by Senator Bernie Sanders (I-Vt.) And (at a slower schedule) Warren solve the problem in one way: people would no longer make bad insurance decisions because they would no longer have insurance options. Everyone would receive coverage from a single plan, regardless of how healthy they are; No one with chronic diseases would be excluded from the market.
But other candidates and voters oppose that approach, either because they think it is politically unfeasible or simply a bad policy. If they stick to the ACA and private plans, they should make it much easier for people to select plans that make more sense to them.
The radical simplification of the plans could mean that Congress would require that all plans in the ACA exchange have the same deductible. Based on research that suggests that deductibles discourage people from receiving the necessary care, I would prefer that this uniform deductible be small or nonexistent.
That does not mean that ACA reviews should eliminate all out-of-pocket costs. Well-designed copays can make people less likely to seek unnecessary medical interventions. Ideally, Congress would press for coverage based on the idea of reducing co-pays for necessary and high-value services (such as statins, for people with a history of heart disease), while increasing co-pays for dubious medical care. Value (such as magnetic resonance imaging (MRI) for simple low back pain), an approach known as "value-based insurance design."
Insurance options would still exist. For starters, the plans would differ in cost, with some insurance companies achieving lower premiums by negotiating lower prices with suppliers and others cutting expenses by reducing their operating margins. The plans would also differ according to the services they offer to members (such as dental or broader vision coverage), the network of providers they offer or even the programs they develop to promote the health of their clients.
Such reviews would not eliminate all confusion, and educating consumers would remain important. But crucially, the survival of the system, the avoidance of a death spiral, would no longer depend on the self-destructive choices of confused consumers. That would reduce the incentive to confuse people.
The goal of insurance should not be to trick healthy people into buying expensive plans that they don't need. A good insurance system should provide affordable coverage for everyone, whether they are sick or healthy, without confusing daylight.
