The Law of Large Numbers - Why Cost Sharing Works Better Than Insurance
In the world of healthcare comes the hot topic of health insurance. Entering the mainstream arena is what some would consider the new kid on the block when compared to the age of the insurance industry.
Today an innovation, tested and proven with more than thirty years of documented history is an alternative to health insurance.
A little-known method that has been used by 500,000 people in the U.S. for more than thirty years, is soon to give the 'fat cats' in the insurance industry a run for their money.
Included in Obamacare, and exempt from the penalty, cost-sharing is a formula to manage health costs based on insurance actuarial science used to determine rates through what’s called the 'law of large numbers', works because it alleviates the financial burden of the few among the many.
To illustrate;
When one person absorbs loss it’s 100%, but spread out among 100 people this same loss becomes 1%. In the law of large numbers, an even smaller impact is felt when deferred among tens of thousands, hundreds of thousands or even millions of people.
That's how insurance and cost-sharing work. However, cost-sharing replaces the insurance profit-driven premium model with a self-sustaining co-op of what healthcare and health plans really cost. And now people see a lot more for a lot less money.
Utilizing this nonprofit co-op approach, each person who participates in the law of large numbers, makes a monthly contribution to the co-op. In so doing, the co-op's members cover the health care costs instead of one person absorbing all risk and burden, or now burdened with heavy financial load of insurance.
The law of large numbers is a math formula tracking costs over time. Basing cost calculations on a per person average, sophisticated computer software and math algorithms match medical costs with the number of members to create a per diem, or a per member contribution.
Once the law of large numbers, or the average cost per person is identified, it is shared. However, we all know the real world isn't average nor is it predictable. Thus, while costs fluctuate month to month over a years’ time and from year to year, cost sharing recalculates the per member cost. Doing so drives down the member cost for what's not really even a comparable insurance. Thus the analogy a ‘lot more for a lot less’.
Today this model is now applied not to just conventional medicine, but in an integration with natural treatments. Looking at the national trend toward optimum health and wellness, CAM or Complimentary Alternative Medicine spending nationwide in 2014 is estimated to be $100 billion dollars.
For many that's in addition to health insurance premiums. With cost-sharing the regulations of Obamacare don't apply and thus implementing natural medicine is expected to hold down in the law of large numbers, the overall cost of the unexpected costs of healthcare.
Helping to ensure people are healthy and pro-active, a cost-sharing law of large numbers proves to be an organic approach to health cost management.
