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Cost Elasticity Engine

Predict utilization response to plan design changes

Behavioral Modeling

Predict how members change utilization when you change cost-sharing

Savings Accuracy

Avoid overstating deductible increase savings by modeling induced demand

Health Impact

Quantify delayed care risk and long-term cost rebounds from high cost-sharing

The Elasticity Principle

When you raise deductibles $1,000, members don't just pay $1,000 more—they delay care, skip preventive visits, and stretch prescriptions. Some of this is good (reducing low-value utilization), some is dangerous (diabetics rationing insulin). Our engine models these behavioral responses by service category, income tier, and chronic condition status—revealing the true net financial and health impact.

Key Elasticity Insights

High-Elasticity Services
  • • Discretionary specialist visits (-40% at +$50 copay)
  • • Physical therapy (-35% at +$25 copay)
  • • Brand Rx when generic available (-60% at tier shift)
  • • Non-urgent ER visits (-25% at +$100 copay)
Low-Elasticity Services
  • • Chronic disease Rx (-8% even at significant increase)
  • • Cancer treatment (near-zero elasticity)
  • • Emergency surgery (zero elasticity)
  • • Insulin for diabetics (-12% = dangerous rationing)

Real-World Impact

Retail Chain (15,000 employees)

$2.8M Reality Check

Broker projected $4.1M savings from $500 deductible increase. Elasticity modeling showed only $2.8M net savings after utilization reductions—plus predicted 14% increase in ER visits for delayed primary care. CFO rejected proposal, avoiding health deterioration cascade.

Broker Projection
$4.1M Savings
Actual (Modeled)
$2.8M Savings
ER Cost Increase
+$900K/year

Technology Company (4,500 employees)

Optimized Design

Used elasticity modeling to target copay increases on high-elasticity, low-value services only. Raised specialist copays $20 (high elasticity, often unnecessary) while keeping chronic disease Rx at $0 (low elasticity, high value). Saved $1.9M with zero health deterioration.

Smart Targeting: Specialist visit utilization dropped 28% (mostly low-value), chronic Rx adherence maintained at 94%—ideal outcome