A new study posits life insurance companies could double their money by covering cancer treatments.
Should the life insurance industry get into the cancer insurance business? Two insurance researchers think so. Ralph S. J. Koijen from Chicago Booth and Stijn Van Nieuwerburgh of Columbia conducted a study of average cancer treatment expenses and coverage of 17 top cancers and determined life insurance companies stand to make substantial profits by offering cancer coverage.
Although cancer treatments have become increasingly effective, they are outrageously expensive. Blood cancer treatments cost upwards of $500,000, 12-week treatments for melanoma costs $159,000. Even if a patient is fully covered, deductibles and copays can put cancer patients in deep debt. For instance a typical ACA plan would still leave cancer patients with a bill ranging from $20-33k.
Life insurance companies make more money the longer policyholders live, as they keep collecting premiums and don’t pay out death benefits. The Koijen / Van Nieuwerburgh study suggests a life policy with a $350,000 would cover the aforementioned melanoma treatments with plenty of change to spare.
The Koijen / Van Nieuwerburgh study found that if life insurance companies were to cover $3 billion in treatment costs for 17 top cancers, they would be left with windfall profits of $4 billion annually. However, life insurance companies may be hesitant to pony up for cancer treatments only for the promise of longer living policyholder. In that case, the study suggests allowing policyholders to borrow against their plan or reduce their death benefit.