Money Drives Behavior
People often do things with other people’s money (OPM) that they wouldn’t do with their own money. That’s an important consideration in insurance risk setting.
A recent study we did on a self-funded health plan illustrates the phenomenon of Moral Hazard. The definition of moral hazard is ” A situation in which a party is incentivized to risk causing harm because another party is obligated to remedy the consequences of the harm caused.
The group had a $0 co-pay chiropractic benefit covering 30 visits per year. Plan members loved the benefit. They loved it so much they went often, some as often as two and three times a week. It turned out chiropractic claims for the year amounted to $410 pepm.
Ouch my aching back!
Something had to be done to reign in these runaway chiro costs. A $15 co-pay was implemented on renewal.
Chiropractic visits have virtually disappeared overnight.
