Cost/benefit of laboratory tests

Insurers choose laboratory test requirements to maximize the relationship between cost and benefit. Traditional means of analysis, such as experience studies, take years or decades to perform. Cost/benefit models provide a more timely option by projecting possible experience according to different scenarios.

The article describes how to create a cost/benefit model.

Hemoglobin A1c and hepatitis C virus antibody tests--and more generally tests reflexed after a prior abnormal test--often have the highest cost/benefit ratio. Mortality savings is higher for tests done on older aged applicants (except for impairments that are more common in young people) and on tobacco users. Indirect costs, such as time, overhead, delays, and false positives, decrease the cost/benefit of testing. Entire markets may follow inefficient testing strategies because insurers do not deviate from the practices of market leaders.

Cost/benefit analysis helps insurers set underwriting requirements by age, gender, tobacco/nontobacco status, and policy amount.