Hear me out on this, please.
Let’s say that I spend $5k on health insurance in a year, but don’t go to the doctor or have any medical issues in that year. Where does my money go? It disappears. I basically just gave away my money, and received nothing in return. However, if I took that $5k and simply put it into a personal savings account instead of giving it away to a health insurance provider - that money stays right there if and whenever I decide to use it. It even collects interest.
I realize that with a health insurance provider, you’re (supposedly) getting discounted rates on medical services - but if your money is just disappearing into thin air if you don’t happen to need those medical services in a given year, are you really saving money? It just seems like a really big scam to me - what am I missing?
So I’m not sure what is happening in this post. The premise is ludacris and the top responses are nonsense.
A five mile ambulance ride to the hospital for non emergency services is like 5k alone.
A simple conversation and basic exam by a doctor is 300 bucks on the low side. That’s just the doctor with a stethoscope checking your heart and lungs.
If you have to go to the emergency room you’re done.
That’s why we have health insurance here. It’s basically a racket.
Insurance is a scam, pure and simple. But the system is set up to force you into it.
For profit insurance is a scam.
If someone is profiting off any insurance system, then it’s a scam.
It shouldn’t be a service, it should be a communal safety net.
Like, insuring a 2 million super car shouldn’t be on everyone, but one of the largest parts of auto insurance is people needing healthcare after. Take that out of the equation and auto insurance becomes more sensible.
For-profit insurance for most things isn’t a scam. Insuring against the destruction of a house or car, for example is a calculated tradeoff; on average, you lose money (expected value is negative), but only a little at a time. In exchange, you get a guarantee that you won’t lose an asset you can’t afford to replace.
For-profit health insurance in the USA is a special sort of scam because they negotiate prices that aren’t available to the public, often an order of magnitude lower.
Like, insuring a 2 million super car shouldn’t be on everyone, but one of the largest parts of auto insurance is people needing healthcare after. Take that out of the equation and auto insurance becomes more sensible.
Yeah, I talked about how assets are different than things we need, like health…
because they negotiate prices that aren’t available to the public, often an order of magnitude lower.
They say they’re doing that…
But it’s a scam where insurance says without insurance it would be 20k, but they got it down to 10k. They pay 5k and put you on the hook for the other 5k.
You think you just saved 15k by having insurance, but if you didn’t and got a 20k bill, they’d offer to “discount” due to no insurance and say it’s 10k.
That “discount” is the real price, the only reason anyone mentions 20k is so insurance seems effective.
If you can’t pay the 10k, it might get lowered again, but eventually they’ll sell the 10k debt to a collector for like 5k or even less, and the collector will ask for the total, but will accept anything over they paid from day 1.
It’s a scam…
You just don’t understand it, that doesn’t mean it’s not a scam, even if that explanation wasn’t enough and you still don’t understand but I give up on replying again.
Yeah, I talked about how assets are different than things we need, like health…
The original comment references luxury assets like supercars. In the USA, the average adult needs a car of some sort to function in society, and often cannot afford the unplanned purchase of a reliable used car (let’s call that $15K). Collision insurance that will cover most of the cost of a replacement car is a reasonable value for many people, and the insurance company doesn’t have any special leverage like access to massive discounts on replacement cars (they may have access to modest discounts on repair services, but nothing like what health insurance has).
You just don’t understand it
I think I made it pretty clear I understand that for-profit health insurance is a scam because providers overcharge anyone who doesn’t have it to an extreme degree. That’s not the case for pretty much anything else.
Well yes, but our system is rigged against us. HSA accounts are kind of what you’re looking for.
In broad terms, you don’t buy insurance because it has a positive expected return.
You buy it to hedge against risk, to spread risk out.
Let’s say — completely pulling numbers out of the air — that there are 10,000 houses in a town. On average, one of them burns down each year.
What the insurer does is take money from all of those people, pool it, and pay out to the one person who gets impacted.
You buy insurance and pay maybe, I don’t know, 1/5000th the price of the house per year. In the long run, you’d expect to come out behind on that, since that’s more than 1/10,000th the price of the house.
But…people don’t necessarily value things linearly.
In the absence of insurance, the person whose house burns down is out a house, which he may consider to be really bad. He may not consider 1/10,000th the price of a house a year or 1 in 10,000 possibility of losing his housing entirely to be equivalent.
If you’d rather have a predictable expense that you can plan around, that’s what insurance provides for.
There can be some other benefits — like, an insurer has time to evaluate relevant factors, like to determine things that might reduce fire risk and to say that you have lower rates if you do X, Y, and Z. An individual probably doesn’t have the data or time to do that. But it’s really the risk mitigation that’s the driving force behind insurance.
In general, you want to take the highest deductible you can afford to take on insurance. If you can afford to cover a $5k unexpected expense, then you want a $5k deductible, so that in the event of an incident where insurance pays out, you pay the first $5k. That way, you’re not paying for risk mitigation that you don’t care about, on that first $5k. Your rates will be lower.
If you can afford to cover an unexpected expense at any level, then you may well not want insurance at all, since you don’t need risk mitigation.
Insurance is always a technical gamble. If you need it for something moderate to big you’ll easily run up a much higher bill than 5k. Could even be enough to eat the years of savings you had.
If you had paid that 5k that year, you’d still have your savings.
Until we get to the total plan limits. They don’t cover costs to infinity, you know. And for something like cancer treatment, most plans don’t actually offer enough coverage to sustain it for years, so you’re still on the hook for tens or hundreds of thousands of dollars after all is said and done.
I see two things you might be missing.
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The insurance company negotiates prices for services. Without insurance, you will likely get billed more than what the insurance would pay.
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Liquid savings accounts are worthless anymore. Unless you’re investing that money, you won’t see any significant interest on it. Maybe a few pennies a year.
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I wouldn’t call savings accounts worthless. You can still get 3-4% APY on a HYSA or CD.
From what I understand, and I’ll be honest, finance is not my department, those generally don’t allow you to pull the money out whenever you need it. They would need to have access to those funds if they intend to pay their medical bills with it.
That is not the case with mine. It’s about 3.5% variable, sometimes over 4%, plain cash savings account in the US. I can transfer from savings to checking at another bank on the same day and withdraw whatever I want. As the other reply from cattywampas said, the number of withdrawals is limited but that’s no issue for me.
There was a federal law called Regulation D that limited withdrawals across all of your savings accounts to 6 per month. That was suspended in 2020 due to COVID and continues to be suspended until this day, but some individual banks still enforce it privately so check your T’s and C’s of your financial institution.
Although imo 6 withdrawals from savings per month should be more than enough.
Confirming that you are simply wrong. There are a ton of high yield savings accounts, by mainstream banks, local credit unions and fintech startups, pick your preference; you can deposit and withdraw any amount any time and interest is calculated daily, paid out monthly. Rates are not fix, they have been hovering 3-5% in the past 10ish years.
Unless you’ve committed to a 5 or 10 year CD, you probably can defer the payments or split them until the CD matures so you don’t forfeit the interest. Also, for proper CD planning, it’s probably best to use a ladder strategy where you have multiple CDs and staggered so one matures every year for you to decide if you need the cash or can reinvest it.
they also reimbursed doctors/ therapists abysmally low sometimes. thats why you hear doctors/ therpaists/dentist drop certain insurance patients.
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Ask yourself what happens if you get diagnosed with cancer in that first year instead of staying healthy.
Spend the savings account on a sweet funeral?
Unfortunately, $5k doesn’t buy you a sweet funeral. You’re lucky to be cremated and remains in a plain plastic coated cardboard box for $5k.
$5k might cover the costs of moving a country with proper healthcare though.
Sounds very expensive there… Pretty sure funerals relatives of mine have had were priced in 2-3 digits.
That is an extremely foreign concept to my indoctrinated american brain… My grandmother pre-paid for her entire funeral, casket and burial plot included, back in the early 1980s and didn’t pass until 2005. It cost her like $3000 in 1980s money and we were told at the time the same arrangements would have cost about $25000 in 2005. Another family member died that same year and was cremated and that cost about $4000 just for the basic plain box mentioned above. I’m sure today it is at least double that… (guessing based on how much more EVERYTHING else costs vs 20 years ago).
Jeez just haul me out to the woods and plant a tree overtop of me, I need nothing but to return my borrowed stardust back to nature
You can spend a few thousand here, but at that point you are getting a fairly large service and feeding everyone too. Burial is also another way to add a lot to the cost.
There is such a thing as a tax deductible HSA (Health Savings Account)
Had to scroll way too far for this. This is exactly what op is describing, and if it works for him, and people like him, it’s a viable choice. For most people, it’s a poor choice however.
My cancer surgery this year and my wife’s hospitalization combined to hit $600,000.
You aren’t paying that with a savings account.
I am also not paying that with insurance. My rattlesnake bite cost $43,000. Insurance covered almost $3,000.
Our out of pocket maximum for the year is $6,500. We hit that instantly.
The problem is it’s not 5k, it’s like 500k and you won’t save that in time. Some people do what you say and as long as it’s checkups and colds they’re fine, but if they get in an accident and need surgery, they can’t pay the whole bill. Insurance doesn’t pay it either, they negotiate. But the hospital won’t negotiate with you like they will with them. You get full bill.
Because everything costs more than you think. Having a child without insurance is often over $100,000. Any visit to the ER for an emergency? $25,000 to get in the door and often millions of dollars if you need lots of interventions. Heck, even with insurance, chronic conditions often cost thousands of dollars per year. Even simple procedures like my daughter’s tympanostomy tubes have self-pay prices in the tens of thousands of dollars.
You may have conflated ‘costs’ with ‘profit’ - countries with actual healthcare don’t allow providers to inflate their costs like the USA does.
A single complex surgery can have billed charges approaching $1,000,000 for the uninsured. Your $5,000 a year won’t even cover the interest charges and your only way out if the hospital won’t reduce the debt is bankruptcy.
Let try this, why don’t we pool our money into a big savings account of pretax dollars for everyone in the entire country and add a supervising org that works with hospital networks to keep cost low through collective bargaining. At some point we the hospital networks become a single national network.
Ok so I hear you, but where do I get to deny claims and make $638,384,274,836.67 for myself while you die of a completely treatable disease? It’s not a fair system to me so I’m going to
bribelobby Congress and get my way.The fix is clearly to have a group of non-medical people in charge of that pooled pot of money who can deny payments for arbitrary reasons.
I think this is the most sane solutionMost sane seems a bit of a stretch, but I will grant you that given the current system sane-er definitely works.
Lol well we have video from last year that showed what we should do with you in that case.
Sounds like communism to me smh
Your idea is to not have insurance. This makes sense for expenses you can cover from your own savings. It makes less sense for expenses you can’t cover from savings. This is why insurance was created, it is a way to pool catastrophic risks where the majority who won’t need it (as much) cover the costs of the minority that does.
For health insurance specifically, it doesn’t make economic sense to not cover the entire population, which is why top economies implement such a system in various ways.
It all comes down to the dreaded ER visit that could be deep into 6 figures+. That’s honestly the only reason I have insurance. I actually needed it a couple weeks ago too.
