No point to medical insurance if on YNAB?

Maybe I'm being naive, or not seeing the full picture... but as I calculate costs of monthly medical insurance premiums, the deductibles, and the average costs of various medical procedures, It seems to me that medical insurance isn't worth it. 

The ONLY reason I see it being a benefit is when you have chronic conditions. (bear with me as I explain the numbers below). 

The "fear" that insurance seems to cover, is the potential of some major surgery, pregnancy, or heart complications, etc. 

But even then... if you have to pay out-of-pocket you can negotiate, you can ask to pay 50% now in cash and ask to write off the rest, you can ask for 0% interest payments, etc. 

If you're young, healthy, you live a fit life,  and you have a cash reserve... I don't see a cost-benefit of insurance... especially if it costs $15k a year for an unexpected event that can cost $50k+.

In other words: After 10 years of paying a $1,500 a month premium, you're down $180,000 for that POSSIBILITY that you have to pay $50k on a surgery (And where your insurance makes you pay a deductible any way... and where they may not even pay for it due to some "technical writing" in the clause). 

Another point in NOT paying insurance: Storing that $1,500, instead, into an investment vehicle that makes 10%  year, yields you a total of $116,155 after 5 years. 

Challenge me on this if I'm missing something here or my logic is wrong. 

(*this is me being 35 years young, healthy, fit,  no chronic conditions... obviously if someone does not fit that model then this opinion does not apply.) 

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  • It's all well and good until you realize at age 40 that your "fit and healthy" body has been hiding a slow-growing cancer that is already in Stage III or IV and that your monthly cash outlay for chemo is over $10,000, sometimes upwards of $30,000. 

    I can think of three of my "young, healthy, fit" late-thirties/early forties friends who fall into this category off the top of my head and if I spent time reminding myself of everyone in my social network I'm sure I could give you many more. And nevermind my best friend's four-year-old who was definitely healthy and fit and had no chronic diseases when his eyelid got this weird lump on it. He is nine now, thank goodness, and hopefully will live a normal amount of time.

    You don't have insurance because it's cheap. You have it because the worst outcome is absolutely insane. And you have medical insurance so that a curable disease doesn't become an uncureable one. Hell, even the average COVID hospitalization is well over the $116,000 you're using as your baseline for calculation. You can be all the young and fit and healthy you want to be and some bat in the jungle transmits a mutation of a virus nobody's ever seen before and wham. 
     

    Like 6
    • WordTenor Or you're 26 and find you have stomach cancer. Because cancer hits very healthy people at ANY age, and the younger you are when you get it, the less likely you are to catch it early (at least, in the "out of close parental supervision" to "normal screenings" age).

       

      Looking at some of my husband's claims for 2020, the office visit has $600 billed to the insurance. He sees the oncologist once every two weeks for most of the year. The radiologist to read his scan is another $630, the scan itself is $6,500. He gets those 8 to 10 times a year.  His normal treatment visit is around $3,000 - although this varies, depending on what labs he needs and if he needs any extra meds.  Those are also every two weeks.

      So we have (600+3000)*12 + (630+6500)*10: $114,500. And that's not counting any of his oral chemo that he got switched to, because that's pharmacy, or any of the 20 drugs that he's on, for which I pay $200 to $300 a month WITH INSURANCE. Nor is that counting the emergency room visits for fever, or any of the other sporadic costs of medical treatment.

      And that's just one year, and he's using really old so relatively inexpensive drugs. Many of the newer ones can be $20,000 or more per dose of the drug. 

      He was 32 when he was diagnosed. He's been working in various types of security for many years, so while he probably couldn't have run a marathon, he was fit and healthy. We've been doing this cancer thing for 5 years. The annual cost up there, that isn't even the annual cost? Is about twice my gross annual salary. 

      I've only ever had one bill where the price got negotiated down. I forget why I wasn't paying it - probably either never saw the bill or kept forgetting.  The negotiated down cost was 75% of the overall bill. Not half. 

      Like 3
  • Thanks for the input. That changes things. So, cost of cancer treatment you said can be in the tens of thousands per month? 

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      • WordTenor
      • Can we agree that goals are dumb and immature? Sure.
      • WordTenor
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      Cornflower Blue Barnacle Easily. And that's just the bare cost of the drugs themselves. Forget the PET scans and doctor visits and anything else you need. 

      Honestly, we are in the middle of a global pandemic. You say maybe you're naive...well, look around yourself for a second. Viruses mutate to work better and more efficiently and the longer we have huge swaths of the globe without good immunity, the more the virus gets to mutate. Who's to say that the upsilon variant of SARS-CoV-2 doesn't transmit between already-vaccinated people in less than a minute outdoors and land all people who get infected on a ventilator within 48 hours? Use thine head. 

      You pay for insurance and you pray you never need it. That's how insurance works. 

      Like 1
    • Cornflower Blue Barnacle I probably should have replied here - see above for my calculations of costs for my husband. Who isn't even on any of the new expensive treatments.  It's approximately 10k/month with just the costs listed; I expect the other medical costs would also be 10k/month or more. 

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  • All that still doesn't make it cheaper than paying the bloating cost of insurance. I'm not saying I WON'T get something (I never said that in my post while I use "mine head")... I'm saying, based on what I see in costs, it doesn't add up... https://www.mvorganizing.org/how-much-does-the-average-cancer-treatment-cost/

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    • Cornflower Blue Barnacle It probably depends on the premiums. But most catastrophic medical events are not short term. It's been five years for my husband, who is still alive. It's been longer for many of the people in my various support groups. It's been at least two for most of them - for whom treatments are still working.

      Diabetes, autoimmune disorders, heart conditions - those all have ongoing medical costs year after year.  Yes, there are things you can do to reduce your risk of developing diabetes or heart conditions - but reduce risk doesn't eliminate it.

      Even if I'd been saving since I started working, I haven't had a salary that would allow me to save enough to have covered his costs entirely out of pocket. Nor has he, even if you combined our finances. Maybe someone well-paid in tech or a specialist who made it out of medical school with no loans would have been able to save up that much. Plus the costs of living without a salary or with a reduced salary, because most people can't work full time when they have to keep going to doctor visits or deal with disabling symptoms.

       

      It may be "cheaper" to save up for it, but it's probably not something most people can afford to do. And it would be to the exclusion of saving up for other things - like a house down payment or vacations or whatever else it is YNABers save for.

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    • nolesrule
    • Stealing From the Future fix is an improvement but is incomplete....
    • nolesrule
    • 1 mth ago
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    Insurance is to protect against high-cost incidences that you cannot afford to self-insure. There is just no way to project when that might happen even if you are seemingly perfectly healthy.

    I would also point out that the investment option is highly variable and in a given 5 year period the range of outcomes could include losing half your money.

    Like 2
    • nolesrule solution: don't park money into a high risk vehicle that only generates 10%. Find better places 

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      • nolesrule
      • Stealing From the Future fix is an improvement but is incomplete....
      • nolesrule
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      Cornflower Blue Barnacle there is a correlation between risk and return. The high return is compensation for the higher risk. When the risk actually shows up, it doesn't matter what the average return is. For example, high yield bonds have a higher interest rate than treasuries because the risk of default is much higher. The same works for different types of stocks and stock funds. There is no free lunch.

      And don't get me started on speculation, or what I call gambling.

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    • nolesrule Stocks and bonds are not the only investment vehicles... An investment with a high risk (potential in losing half in 5 years) and a low yield (10%) is crap compared to many things out there i n my opinion. 

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      • nolesrule
      • Stealing From the Future fix is an improvement but is incomplete....
      • nolesrule
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      Cornflower Blue Barnacle then you are probably not aware of or are ignoring the actual underlying risks involved with investing with statements like that. The human ability to adequately assess risk isn't all that good, so we can forgive you for that.

      The average stock market return is in the neighborhood of 10% , and that includes things like the dot bomb, the GFC and even last year's COVID crash, which was short lived. The market as a whole is well diversified and so reduces but does not eliminate risk.

      The risk of individual specific investments may have a higher expected return than 10%, but that's because they also have a higher expectation of risk of losing a large portion of the money or going to zero entirely. Again, there is no free lunch.

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    • nolesrule You've missed my whole point...

      I never said there is no correlation between risk and return. Nor have I said there's no risk. You've scurried over to write your (great) reply, with all these presumptions rather than asking "What do you mean?" (well why should you? you have no clue who I am, I'm just a brand new stranger on this forum).

      ... anyway, If you'd rather choose to believe that stocks and bonds define the expectations of ALL investment choices then so be it, that's your problem (and many peoples). 

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      • glynab
      • glynab
      • 1 mth ago
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      Cornflower Blue Barnacle I'll ask.  What do you mean?

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    • glynab Promissory notes secured by anything you're comfortable selling/managing/trading, loans, tax liens, your own business, partnership... These are obviously not as "easy" as buying a stock on e-trade (or less known about). But I was only responding to nolesrule that I (big capital I) cannot achieve 10% without high risk. Which is B.S. (in my world... not in the world of someone who sticks with buying shares of random ETF's and businesses).  I achieve 10%-15%  annum (with low risk) by buying partials on promissory notes that are secured by real estate, or loaning to a local business for a transactional loan or local flippers who I trust and know are exceptional managers. 

      If a note secured by RE defaults (which doesn't happen often), I have an asset worth 2x-5x more than what I pay... yes, yes, I know, the naysayers (who don't invest in real estate) will say, well what about a crash!? Simple answer: Buy well. Don't play on speculation. Rents are always there no matter a crash. 
       

      But again, this was just me responding to some ones presumptions of what I (and many others) can get. If you're interested in this. I suggest picking up books by the late Jimmy Napier (no I'm not affiliated with his estate or whoever owns his books now).

      There are also less "traditional" modes of "investing" that yield high results with low risk if you look around. For examples, If you ask to pre pay rent 6-12 months for 1-2 month discount you technically yield over 60% on that prepayment. 

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    • Where, in your experience,  do these rent reductions happen? I have 2 kids who, over the past 4 years, have lived in 5 different apartment complexes.  Never once has the apt management company accepted a reduced rent upon being offered an entire years' rent up front.

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    • Periwinkle Flute OP apparently lives in some magical land where paying for anything upfront with cash results in reduced payment, that no one else has ever encountered. And where real estate investments never require large amounts of fixing to get returns, so they're only profitable, and where everything just magically works. 

      I suppose that's a better magical land to live in than the one P lives in, where everyone charges you several times more than that should and is always scamming you, etc. 

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  • I have a very wise and financially savvy friend who has always said that insurance is betting against yourself.

    I DO see your argument, and I agree with it for the most part... however, most people are really not in a financial position to be totally independent and prepared to take on the massive costs of cancer and those type of catastrophic situations. My friend has lived this way for years, and has the means to work our various scenarios to save himself money. Frankly the doctor's offices would LOVE it if people didn't have to deal with insurance because they could charge reasonable rates AND not have to spend the hours upon hours upon hours wrestling with insurance companies just to get paid.

    But I have to say with the costs of healthcare unless you're able to start out with a really large nest egg that's just sitting there waiting to be used for some sort of health crisis, it's probably not advisable to go without insurance in the current environment. That same friend of mine ended up being a covid long hauler and has had to have in home care. He has dealt with it, and he is fine financially to do so, but most people can't manage being incapacitated and unable to work for long stretches of time.

    So it's not just about the insurance, but what happens if you're unable to work, and how you're going to keep the bills covered in that type of a situation.

    I agree though - here in the US insurance costs a LOT more than it should, and is a racket. It's frustrating, but having something is better than taking the risk of having nothing.

    Like 1
    • Cornflower Blue Barnacle So in your case, if you can afford the high costs of a catastrophic event (and the tax penalty for not being insured? I think CA has that, even if the federal one went poof?), insurance isn't worth it. But most people, including most YNABers (which is how your position started), can't afford that. 

      Also, I've talked to a number of uninsured people about their health care costs and payment plans. Not one of them mentioned a cash discount, so I don't know if it's something unique to your area, but it's definitely not something offered to all uninsured people. 

      Insurances negotiate discounts as well. As others have mentioned, since the insurance will reliably pay the provider, their price negotiations include the consideration of covering at least some of the costs for people who can't pay.  (For definitions of reliably - claim denials and arguments therein are definitely a thing and can take years to resolve, but that's unrelated to the discussion here.)

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    • Fuzzball Meows The cash "discount" I've received (before I had a health share) when going in for routine checkups or a specially doctor. Or sometimes they phrase it as, "Oh here's the price for a cash patient..." (which not that I think about it, I have no idea if that's a discount or they rank it up)... but i see discussions about for some services, it's SOMETIMES cheaper to pay out of pocket than pay your insurances co-pay. I googled it and there are articles on the topic. 

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  • $1500 a month, holy hell. 

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      • Ali
      • alibee
      • 1 mth ago
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      SgtBatten My thought too! I pay $20/month for my HMO plan through work (for just me, major US city, union job). My naivety here was not realizing how expensive insurance is for other people...

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    • SgtBatten Ali I'm wondering if this is an assumption rather than an actual insurance quote. I'm on the health exchange and my plan is $118/mo with a subsidy, or $338 without. If I had a higher income I would gladly pay $340 for my coverage. I get weekly therapy free and all my medications are free. Primary care, free. Most specialists, $30. Bloodwork and other tests, free. I could have gotten a plan with a cheaper premium if I wanted something catastrophic, but I picked one that would allow me to actually get regular medical care, which IMO more people should seek out especially during a pandemic and global mental health crisis. I see that as the health equivalent of funding my true expenses - like funding my car repair category for quarterly (...ish) oil changes instead of waiting until my car engine is completely toast to take it in for service. [reminder to self, schedule that damn oil change!!!]

      Maybe the OP's employer has a really expensive plan, but if it doesn't meet affordability metrics* then by law they are free to choose a plan on the exchange and those typically range between $300 - $600 before any potential subsidies. Every state is a bit different but those are generally the ranges - nowhere near $1,500. You can get an insurance broker free through the exchange as well, who can help you navigate the options. With the current regulations, for anyone I can only imagine a plan costing $1,500/mo for a family with kids, in which case you definitely need that coverage because you're gonna be using it a lot.

      *Note: OP would have to be making about $180,000/year for a $1,500/mo premium to be considered unaffordable. Any annual salary less than this would trigger eligibility for ACA. In that high earner scenario though... the better financial move is probably still to get insurance. Get a low premium, high-deductible plan and max out that HSA!

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    • mandiferous I'm self employed and that was a quote I received from Covered CA, which is the Obama care in California... But a health share (different than insuranace) costs me $500 a month for my family 

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    • Cornflower Blue Barnacle gotcha - you having access to (and interest in!) a health share, along with the fact that you have a family and are not a 35-year old individual paying $1,500/mo for individual coverage, is all important context for this calculus! 

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    • mandiferous Yeah the health share is a huge difference in cost. But it's not guaranteed unlike insurance and covers a lot less than insurance. 

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      • jenmas
      • jenmas
      • 1 mth ago
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      Cornflower Blue Barnacle Not to mention, a lot of them require you to make a statement of faith, which many are not able to do.

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  • Cornflower Blue Barnacle said:
    and ask to write off the rest,

    You know who pays for these write-offs? Insured patients. Providers hedge their bets when calculating how much they will lose from uninsured patients who can't pay their bills and then negotiating prices for services with insurance companies.

    It may not be applicable in your situation, but if someone is uninsured, things like hormonal birth control ("the pill") can cost hundreds of dollars a month, even for a young and healthy individual. Sure if you are lucky, you may be close enough to a Planned Parenthood where you can get affordable birth control, but not everyone has access to PP.

    Like 3
  • jenmas said:
    You know who pays for these write-offs?

     Also tax payers, because there are some programs in place to reimburse safety net hospitals from government coffers so they don't fall because of uninsured patients. 

    But yes, that is a major part of why health care costs and health insurance premiums are so high.

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    • Fuzzball Meows I think it's interesting that non insured patients have a cash discount in most places... Either the clinic is over charging the insurance company or it's something 

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      • jenmas
      • jenmas
      • 1 mth ago
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      Cornflower Blue Barnacle Insured patients subsidize the costs of uninsured patients.

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    • jenmas When does a consumer "subsidize" a service? Governments subsidize, not consumers. Insured or not, they are still a consumer in the marketplace. And Consumers' set the price (typically)... If you're saying they make up the cost... well that's different and it's a much more complicated issue because you have heavy government subsidies that influence the price of health care. By saying that uninsured "jack it up" you're saying here that health care is a universal, fixed price when it's not (or at least shouldn't be). It's a service like anything else and consumers (should) have a say in price with their wallets. 

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    • Cornflower Blue Barnacle clinic is definitely overcharging the insurance company (I've had providers confirm this to me), but the insurance company is also largely not paying out that entire amount. Sometimes the surplus gets sent to the client but it can also get written off as an expected loss. Sooo, giving a cash discount might allow providers to actually net more money in the end. This is also why some providers (particularly time-intensive ones like psychology where you have hour-long visits to notate) won't accept insurance at all; they may charge less than what they could get from insurance, but have less administrative overhead and can take more clients. What a system!

      Like 1
  • I’m 42, don’t think I’ve had more than random colds in my life, running half and full marathons, always physically and psychologically strong. Our 3rd kid however was born with a syndrome that relates so several but mostly fixable orthopedic challenges (luckily mentally fine and with a normal life expectancy). The expenses at those speciality Children’s hospitals are insane. If it’s not you it could be your family if you have one. Don’t skimp on insurance!

    Like 4
  • If you run the numbers, insurance never makes sense in the way you're describing.

    The cost of insurance is (odds of a negative event) times (cost of the negative event) plus (cost of services provided by insurance company) plus (insurance company profit) plus (insurance company overhead).

    The expected return on insurance is (odds of a negative event) times (cost of the negative event) plus (cost of services provided by insurance company).

    What you're buying with insurance is a transfer of financial risk from yourself to the insurance company. You can, over time, expect to pay more than you get back. But with insurance, you will never face the devastating financial consequence of a negative event happening to you.

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    • Aubergine Quokka great answer.... Another variable in the equation is the hassle of dealing with it when something comes

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  • I mean - you're right: insurance companies wouldn't be in business if they were losing money. That said, unlike insurance companies, I don't have the cash flow to gamble on the health and wellbeing of my family. One other thing that I don't think has been mentioned is that many employers pay partial/entire premiums as a benefit, and they often don't offer cash in place of those premiums if you opt out.

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  • Cornflower Blue Barnacle said:
    Maybe I'm being naive

     this

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  • I appreciate everyone's thoughtful posts (except for one troll who's probably not intelligent enough to read through the post...) But for the record, I never said I wouldn't get sick or get some catastrophic event. It's A cost basis argument. And I understand that it doesn't apply to everyone. In order for insurance to be "more expensive" than not having it, one would have to own assets they can dissolve/trade, have cash reserves, have strong negotiation positions, have the ability to easily make/create/trade income when those events happen, etc... But again, not everyone will be in a position like that... And BTW I DONT have those enough of those assets currently that I can easily dissolve for medical costs if you're wondering.

    Like 1
  • jenmas said:
    Insured patients subsidize the costs of uninsured patients.

     *Who don't pay. 

    I've experienced two types: one who was in debt for 30+ years because of a catastrophic medical event and slogged to pay it off. A subset of this type are the ones that have to inherit the debt. 

    The other type blew my mind. A colleague was bragging about how her family never went to the doctor - only the ER, because they're required to take them in. Then, she was so proud that they could game the system by paying only $1/month in order to keep the debt from going to collections. In response to the dumbfounded looks, she said this was normal for people of her heritage. It brings the phrase, "take advantage" to a whole new level. I still wouldn't know how to respond to that. I still don't know how she had the temerity to say it out loud.

    Just wanted to clarify that there's a big difference between those who pay and those who don't. 

    I do think that prices would be better if people had to pay or at least process the insurance payments ourselves. Instead, I think one of the many factors for rising medical costs is the removal of that information from the patient. I've started asking, and how transparent they are impacts my decision. 

    I've had a doctor completely change their recommendation to include many expensive, unnecessary (as confirmed by another doctor on this situation) tests simply because the check out person saw that my insurance at the time would cover. Again, she said as much out loud. I'm grateful for her lack of discretion, but it's certainly increased my vigilance in medical interactions.

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  • I'm really glad I had medical insurance when I had a surprise heart attack earlier this year. The hospital bill alone was $77,000+. Plus ambulance and other doctors. I paid $2800 total out of pocket. This event alone covers what I've paid for medical insurance through my company for at least the last 10 years. Sure glad I didn't have to put a huge dent in my savings.

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  • Interesting thread to read from the UK. Having grown up with the National Health Service I've never felt the need for private medical insurance which some people do take out. The NHS is a massive fiscal burden for us all but it is a very popular institution and gives access to treatment free at the point it is needed.

    It has been interesting to follow the debate in the USA when health reform has been discussed and NHS style tax funded healthcare tends to be framed as choice restricted by bureaucrats.

    It's not perfect and it is taken for granted but we all have peace of mind because it is there.  

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      • MXMOM
      • MXMOM
      • 1 mth ago
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      Nwozer similar situation here in Canada. Only bill I ever received was a $45 splint charge which I was able to get reimbursed through work. Ambulance -no charge. Air transport- no charge. Week long stay in regular room - no charge. I do pay for semi private coverage insurance through work but my dad was in the hospital for 9 days in semi private room with no charge. We pay much higher taxes than US so I always like to say that I don’t have FREE healthcare. It’s just prepaid through my taxes. 

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      • Yes I can
      • yesican2020
      • 1 mth ago
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      Nwozer Similar here in Australia - although ours is a mixed system. and our conservative government is working their hardest to change the situation and limit people from getting access to publicly funded health care.   Australia pays relatively low taxes compared to the rest of the OECD.  MXMOM I agree that I'm prepaying my health care - but I'd also like to think I'm giving a bit to people who can't afford healthcare. 

      This site has been a shock to me in terms of how much everyday health care  costs in the US.  Its also made me view the media stories about health 'reform' both here and in the US very differently 

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    • Yes I can Unfortunately many people here in the US refuse to support "socialist" programs, which is why our healthcare and secondary educational costs are out of control. (Yet they're perfectly willing to send their children to "free" public schools through grade 12, visit national parks and libraries, and use their local fire/medical rescue/police services. Go figure...)

      Like 2
  • I agree with what others have said about surprise medical costs and just how crazy they can get.  I'll add one other thought here:  Have you considered whether it's not a question of the value of insurance (as a general strategy) to you, but that you have the wrong insurance for your situation?

    This is going to be a very long explanation, because I don't know how much readers know about the real long-term costs of health care the way it shook out in the post-ACA world, so grab a cup of tea or beverage of choice and  settle in.  Note: most of everything I say here has to do specifically with how health care is funded, insured, and taxed under US law.  If you are outside the US, this information is useless to you.

    I'll admit that the ACA has greatly reduced choice: one of its explicitly stated goals is to force young, healthy people to subsidize the old or unhealthy.  That said, there is still some choice in the system if you know how to use it.

    $1500/mo for a single, healthy 35yo is certainly quite costly.  However, there are approaches to insurance that lie between that and outright self-insurance.  For example, I'm on a high-deductible health plan which costs me $257/mo for the whole family.  There's another $901/mo in costs subsidized by my employer.  That's $1,158/mo total, for three people.  (I work for a public university, so they are required to report exactly how much they spend on this stuff.)

    I also have an HSA (Health Savings Account), to which my employer contributes $2,600/year and I contribute $500/year.  These are pre-tax dollars, and no tax is charged when it goes in, earns money through investments, or comes out, as long as anything that comes out is spent on medical expenses for my family.  So, between the insurance and the HSA, my family puts $16,996 into health care per year, or $472/person/month. 

    Having a high-deductible health plan and an HSA is like being partially self insured.  My insurance covers:

    • Things the ACA requires it to cover, like vaccinations and contraception
    • 0% of anything else, until annual deductible amounts are reached.
    • 80%of all costs after the deductible is reached, until my out-of-pocket maximum is reached.
    • 100% of everything--no copays or anything--once the out-of-pocked maximum is reached.

    I'm 38 and my husband is 36.  We have a teenage son.  My husband and son are quite healthy, while I have a number of difficult-to-manage conditions.

    To recap: My family of three pays less than you do per month for health care ($1,416 for three people vs $1,500 for one), and because we rarely use the whole HSA contribution in a given year, we've gotten a few thousand in tax-free savings out of it as well.  Your monthly costs may actually be higher than what you posted, if your employer contributes to your health plan premium and you didn't factor that in.  I'm saving a few thousand per year in taxes due to this set-up, so my real net costs are even lower than stated.

    Why don't more people do this?

    Many people just don't know about HDHPs and HSAs.  They haven't been around forever, and the way they work is not obvious.  I did a lot of research into health care plans before taking my current job because my primary reason for moving from consulting to being a full-time employee was because the ACA drastically raised the cost of insuring my son (then a young special needs kid) on the open market.

    To people around me, it looks like I pay a lot more for health care compared to a comprehensive health care plan (e.g. an HMO or PPO), because I have to lay down a debit card for about $95/mo in medications, and $165-$220 per doctor visit, etc. instead of paying a small copay.  I've had people ask me if I have no insurance because I pay so much.  However, that's my HSA debit card, spending only the HSA contributions I considered in my base expenses above.  Additionally, when it comes to medications, I have the option of paying either my insurance company's negotiated rate, or the cash-payer rate with any discounts offered, whichever is cheaper.

    The high-deductible health plan (you'll see it abbreviated "HDHP" in many places) combined with the HSA gives me a lower total cost of health care, while building savings, with more flexibility in how and where I receive care, in exchange for that experience of seeing a big bill and pulling out my HSA debit card.

    I usually have about $4,000 over our annual real costs in the HSA, and my family out-of-pocket maximum is $6,800.  So, my worst-case emergency, where all three family members have critical emergencies in the same year, the bills I'm left with after my HSA is expended cannot total more than $2,800.  I can fund a $2800 emergency from my "Emergency Savings" budget item right now.  It's unlikely, but I'm prepared just in case.

    Given that you are a savvy YNAB-er, you're unlikely to experience the panic reaction to money you already have saved for a specific purpose going out the door for that purpose, which keeps most people in comprehensive health plans.  My advice is to look into the combination of an HDHP and HSA, so you get the sweet spot of lower costs than traditional insurance, with a truly robust safety net in case of a real crisis.

    Is it really better?  What if my employer just got an especially good deal?

    Let's look at my employer's PPO option.  It would cost me $919/month and my employer $3,221/month* for a total of $4,140/mo or $1,380/person/mo.  This is getting closer to what you are paying.  My family would still have a $1,500/year deductible, and for families that take the standard deduction (most middle class and below), that is taxed.  That is $17,060/person/year, before one escapes the deductible compared to $5,665/person/year and having a bit of savings left, earning through investments, before the deductible is done.

    * This number is estimated, as I can't figure out how to look it up for a health plan I've never been on.  It would be consistent with the other employer contributions, though.

    Once the deductible is expended, my out-of-pocket maximum was $6,800 for the whole family.  On the PPO, that is $7,200 *plus* another $9,900 out-of-pocket for medications which are not counted against the main out-of-pocket maximum.

    In a whole-family crisis, over the course of a year a family of three would pay:

    On the HDHP+ HSA:  $6,599/person
    $2,800 for the year beyond the initial investment of $16,996 in premiums and HSA contrbiutions

    On the PPO: $22,627/person
    $16,700 for the year beyond the initial investment of $51,180 in premiums.

    For a single person, the total crisis-year outflow would be:
    $4,740 for HDHP+HSA  (Assuming that, being single, you have only socked away $1k surplus in the HSA before the crisis, as opposed to my family's $4k)
    $20,629 for PPO

    So, any way you slice it, in the best of times or the worst of times, the HDHP+HSA costs less than a comparable HMO or PPO.  I'll also note that of the two HDHPs my employer offers, I'm on the more expensive one, because it gives me more freedom to obtain health care out of state should something happen when I am traveling.

    Is this true for everybody?

    I used numbers from my employer's specific plans to make the comparison, just because it's easy for me to obtain.  The exact numbers will differ from place to place and between insurance companies and plans within the US.  However, unless your state taxes HDHPs differently than HMOs and PPOs, the situation should be the same.

    The big thing I'd watch out for is that a few employers offer the HDHP and bank the savings, rather than contributing a portion of the savings to the employee's HSA.  That could change the math a bit if your employer pays so much of the HMO/PPO premiums that your share of the premium goes down by less than $250/mo for a family or $150/mo for an individual.

    What if my employer doesn't offer an HDHP with an HSA?

    If your employer doesn't offer insurance at all, you might want to look into what sort of freelancer collectives, co-ops, and/or PEOs (Professional Employer Organizations) exist in your state.  Each state's rules on this are different, and they can come under different names, but they all work under the same principle:

    If I am self-employed, or at a company with too few employees to get a good health plan, I can sign up for the PEO where I am technically their employee (even though my clients pay me, or my small company pays me).  They do this for many freelancers and small businesses, so the PEO gets big-business rates and benefits at bulk prices.  They add on %5-%15 to what they are paying, to cover the taxes they have to pay and the administrative overhead of the whole thing, and customers end up paying less for insurance (and other benefits like life insurance) than they would on the individual market.

    Some PEOs or PEO-like organizations will even let small businesses buy the services on behalf of all their employees, letting someone at a 6-person shop get a quality of insurance usually only available to those at huge organizations with tens of thousands of employees.

    If your employer offers an HMO/PPO and not an HDHP with HSA, talk to them.  Once they learn about how much the company can save, they may make an HDHP available the following year (ask early, this can take months to research and set up).  If not, you may be able to negotiate going off your company health plan and taking the money they would have spent insuring you as a yearly cash pay-out, using it to get an HDHP and HSA through a PEO/coop/etc.

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      • MXMOM
      • MXMOM
      • 1 mth ago
      • Reported - view

      HedgeMage I did not read the whole post because hey, I am in Canada. But fun fact, I read a couple of interesting articles about how everyone believes that Canadians pay lots more in taxes than Americans and apparently, it depends. From what I recall, those at the lower income levels pay more tax in the US than in Canada.  Those at the high scale pay more in Canada than in the States. And of course, everyone's situation is different. 

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  • I thought about writing  individual responses to the various comments about free-riders in the system, whether government single-payer health care is a good idea, etc., but that one on HDHPs was a doozy, so I'm going to do one general response with a few points:

    • I can't blame free riders when the system makes being a free rider easy and a more predictable way to ensure that their family is cared for.  It is understandable to want to avoid such an indefensibly opaque and unfair system if one can.  I say this as someone who didn't free ride when her family was poor and uninsured, and who is now in the position of being one of the people subsidizing free riders.
       
    • It's shocking how much money one can save in a year by learning some basic at-home medical skills. I was forced to do this as a child, living with no insurance in a town that was something of a jurisdictional black hole where we couldn't get reliable ambulance service. As adults, my household avoids on average 8 clinic visits per year, and generally can use a less-expensive clinic or urgent care in lieu of an ER visit because I have some basic home health and first aid skills.
       
    • Don't trust how mainstream media paints the questions about government involvement in paying for health care.  Media makes more money by playing the divisive game that our politics has set up: grossly oversimplify and straw man one party's position or the other, ignore any possible solution that's not in a major party platform, and use binary thinking/rhetoric to rev up their audience.  Whether the specific commentator or outlet leans toward team red or team blue, there is more money in making one of the teams look evil than in telling the whole, inconvenient, complicated truth.
       
    • The US health care "system" (it's more of a hodge podge, really), has inefficiencies and brokenness in so many places that one would have to write a book to capture a fraction of it.  Luckily, people smarter than I have written many good books on the subject.  To get started, I recommend:
    • If I were to summarize the overarching dysfunction of health care costs in the US, rather than taking a party-line stance or trying to blame an individual player for something that many contribute to, it would be like this:

      We have ended up in a situation where most medical decisions--whether related to cost or type/quality of care--are made very far away from those most impacted by the outcomes of those decisions.  This means that decision-makers don't get enough high-quality direct feedback, and their priorities may not be aligned with either the health care provider or the patient.  Additionally, these disconnects have necessitated some very expensive abstractions.
       
    Like 1
  • Yes I can said:
    I agree that I'm prepaying my health care - but I'd also like to think I'm giving a bit to people who can't afford healthcare. 

     I like to use the phrase "prepaid with your tax dollars" instead of FREE because none of it is free.

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