In my latest essay, I write,

Ask an economist what is the best type of health insurance, and he or she is likely to respond “catastrophic coverage.”

…In practice, we observe very little catastrophic coverage. Instead, the most widespread form of health care coverage is what I would call insulation, because consumers are insulated from having to pay for health care goods and services, even if they are not for major, expensive illnesses

In the essay, I express dissatisfaction with the economic explanations for the prevalence of insulation rather than insurance. Instead, I suggest,

I believe that people tend to “disown” their ailments. It is not that we deny that we need care (although denial is something that happens as well). It is that we deny that we should need care…

Who wants to pay for treatment when deep down you believe that it is wrong for you to need it? Yes, you know that you need the treatment, but you disown this need because it seems so unfair. Having a third party pay for the treatment appeals to this desire to disown one’s frailty.

UPDATE: John S. Ford writes,

I think that it’s really simpler than that. When an employer or the government pays the premiums, patients will be singularly unconcerned about the cost of premiums. However, the greater their own responsibility in paying those premiums, the more likely they are to take a high deductible, catastrophic health plan (though they’ll grumble bitterly that they can’t afford good insurance). In fact, if the premiums are high enough, they’ll take the ultimate catastrophic plan: no insurance at all.

Read the whole thing.

For Discussion. How could one test the “disownership” hypothesis?