In this section, we consider a back-of-the-envelope empirical implementation of a tontine health insurance policy.
Our tontine policy can be described by four parameters, of which any three can be chosen by the insurer.
the size of the tontine prize at the end of three years
the threshold for spending over the previous three years that defines eligibility for the tontine prize
We consider additional monthly premiums for the tontine prize of $10, $25, and $50, and eligibility thresholds of $250, $500, $750, and $2,000.
To see how the table works, consider an additional monthly premium for the tontine prize of $10 in the first row.
From a policy perspective, it might make sense to exempt preventive care expenditures from counting against the tontine threshold as a way to encourage investments in vaccinations, routine checkups, and so on.
HEALTH INSURANCE AS HEALTH CARE The transformation of the traditional indemnity health insurance product into the plethora of managed care products that dominate the health insurance market today has made a health insurance tontine even less thinkable for an executive at an Aetna, CIGNA, United Health, or a Blue.
Anyone who is rational and immune to the bias should not find tontine health insurance attractive.