The Psychology of Medical Coverage

For the last couple of years my family doctor has offered me the option of purchasing extended health coverage to pay for any of his services that I would have to pay for, such as copying records, immunizations, and filling out medical forms. The list is actually 23 items long.

I’ve never bothered to pay this “block fee” with the reasoning that I rarely need any of these services, and they are relatively cheap even if I need them one day. However, over the past year, I actually spent a total of $60 on services from my family doctor that weren’t covered by provincial health insurance.

Each time I coughed up another $20, I felt like I was losing out. If only I had paid for the insurance, I wouldn’t have to be digging into my pocket. What if I incur more costs this year and it works out that I have to pay more than the amount of the insurance?

When the papers inviting me to sign up for extended coverage for the upcoming year arrived, my first reaction was to pay. I had to think it through rationally to overcome this first emotional reaction. The coverage costs $150. I only paid $60 in a year where my costs were unusually high. It makes no sense for me to buy the insurance. Fortunately, I only have to be rational once per year in this case.

I’ve seen this sort of emotional response to medical coverage before. Years ago a former employer of mine made big changes to the pay structure, savings plan, bonus plan, and medical benefits. When it came time for employees to ask questions, they spent much more time on the coverage for new glasses than they did on non-medical issues. The amounts at stake in the bonus plan, savings plan, and pay structure were many thousands of dollars per year, but all management had to do was give in for about $100 per year on the “glasses” issue.

For some reason, Canadians (including me) seem to attach more value to extended medical coverage than it is actually worth, based on my limited observations. If this is true in general, then no doubt employers have found a way to exploit it to lower the overall cost of employees.