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  • Writer's pictureKirk Hartley

An Insurance Cap Falls – How Many More Should Fall ?

Insurers like caps on payouts. Why? Because it makes life easy for the actuaries. X number of incidents for an insured population of Y times a max of $ ZZ means that total risk is quantified. Contrary to Wall Street myths aboyt swash buckling risk takers, the financiers hate risk – they like to eliminate risk and make certain money. That’s why they like caps on medical malpractice awards.

But, thanks to Twitter, one insurance cap has fallen. The fallen cap? A lifetime maximum of $ 300,000 for health insurance ASU college students.

Why did the cap fall? Because a student with colon cancer exceeded the limit, and complained on Twitter about the annual cap imposed by Aetna. Ultimately, the CEO of Atena was pulled in and did the right thing – Aetna covered the unpaid bills. Then the CEO went a step further and worked with ASU to move the cap up to $ 2 million. In 2014, the cap will disappear as required by "Obamacare."

A significant fact. The student exceeding the maximum was the first to do so, according to the NYT article. So, obviously, the absence of the cap was not going to break Aetna. Instead, if enforced, the cap would have been enforced against a sick student, leaving him with both cancer and $118,000 of medical bills. That’s a terrible outcome, which illustrates the flaw of caps – the point of insurance is to spread risks to all so that no one person gets stuck with a massive bill they cannot possibly pay.

One more point? Ever heard a statistic on how many medical malpractice "pain and suffering" damages awards exceeded $1 million? Neither have I. If anyone has seen data on the point, please speak up.


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