Cost/benefit of laboratory tests.

Area of Science:

• Actuarial science
• Health economics
• Underwriting

Background:

• Insurers aim to balance laboratory testing costs with benefits.
• Traditional analysis methods (e.g., experience studies) are time-consuming.
• Cost/benefit models offer a faster alternative for projecting outcomes.

Purpose of the Study:

• To describe the methodology for constructing a cost/benefit model for insurance underwriting.
• To evaluate the cost-effectiveness of various laboratory tests in risk assessment.

Main Methods:

• Development of a cost/benefit model framework.
• Scenario analysis to project potential outcomes based on different testing strategies.

Main Results:

• Hemoglobin A1c and hepatitis C virus antibody tests demonstrate high cost-benefit ratios.
• Testing older applicants and tobacco users yields greater mortality savings.
• Indirect costs (time, delays, false positives) reduce the overall cost-benefit.

Conclusions:

• Cost-benefit analysis informs underwriting requirements based on applicant demographics (age, gender) and risk factors (tobacco use).
• This approach allows for more precise and efficient selection of laboratory tests.