# Health Insurance Is a Scam, Why Do People Buy It? **URL:** \ **Category:** Great Debates\ **Created:** [March 31, 2012, 9:25pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414 "2012-03-31T21:25:35Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![snowthx](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/snowthx/32/10660_2.png) [@snowthx](https://boards.straightdope.com/u/snowthx)\ **Post date:** [April 4, 2012, 12:45pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/61 "2012-04-04T12:45:53Z")
> [@curioushat](#): > > Then why not just purchase health care, not health insurance? > > Flat rate, and much lower corporate overhead. Thus, cheaper rates. Additionally, less fighting with corporations whose goals are to profit, not be compassionate. Utilizing routine services via your insurance will still be less expensive per use than purhcasing said service on your own as an uninsured. Why? This is due to the insurance company’s negotiating power and acquiring lower rates by volume for such things as medications and routine Dr appts. If you bore the true cost of these things it would be much more for you on your own, setting aside catostrophic events. You are buying access to their negotiated networks of drs, pharmacies, and hospitals. An individual just does not have that same power. Now, the question of the presence of insurers shielding people from the true cost of health care driving up costs is valid, but probably a whole other thread. For now, most accept health insurance, car insurance, homeowners insurance, etc. as a nessessity of a responsible modern life, even if most think they will never need it (e.g. "I don’t _ **plan** _ to get in sick, be in a car accident, see my house burn down, etc.). ---
**Author:** ![gamerunknown](https://avatars.discourse-cdn.com/v4/letter/g/6bbea6/32.png) [@gamerunknown](https://boards.straightdope.com/u/gamerunknown)\ **Post date:** [April 4, 2012, 1:01pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/62 "2012-04-04T13:01:17Z")
> [@](#): > > And you can’t compare other countries to the United States. It is well-settled that drug manufacturers sell drugs at a discount to countries like Canada and the UK and at a huge discount to developing countries. So much so that a recurring debate is when the government tries to buy prescription drugs BACK from Canada because they’ve purchased them at a government mandated discount. So drugs are only being manufactured in the US because there’s a free market (actually, the government is prohibited from negotiating prices). However, they are willing to sell those drugs to countries that subsidise the drugs. If the US subsidised those drugs with federal money, the manufacturers would either stop manufacturing or move to another country with a free market and healthcare would decline in the entire industrial world as a result (not to mention, the only reason other industrial countries have a better quality of life is because they subsidise American free market drugs). Is that a fair summary? ---
**Author:** ![Gedd](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/gedd/32/4938_2.png) [@Gedd](https://boards.straightdope.com/u/Gedd)\ **Post date:** [April 4, 2012, 2:32pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/63 "2012-04-04T14:32:47Z")
It’s not a scam to me; I’m one of the people who come out ahead. With the high deductable plan I’m on, after $2200 everything is covered 100%. I cost over $1000 a month on prescription drugs so after February I can get sick all I want. On top of that in 2012 we had a baby, I spend three days in the hospital which included an EEG and an MRI, and my wife had her gallbladder removed which led to an overnight stay. With our deductable we probably paid less than 10% of what our bill really was. I’m the reason health insurance is around. I say it’s not a scam, it’s a gamble. (If you feel like you’re being cheated by health insurance don’t worry, I’m getting revenge for you.) ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [April 4, 2012, 2:46pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/64 "2012-04-04T14:46:43Z")
> [@jtgain](#): > > It’s no more unclear than your homeowner’s insurance. Your homeowner’s insurance doesn’t cover light bulbs and a/c filters. You know you will need them. It does cover fire damage because that is an unknown that most people can’t afford to pay out of pocket. Well, that’s a nice attempt at an analogy, but it doesn’t work because I don’t come with parts that are designed to wear out, and there are no warranties covering any of the others. ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [April 4, 2012, 2:56pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/65 "2012-04-04T14:56:38Z")
> [@jtgain](#): > > The very nature of the insurance market fails when you KNOW that you will need to make a claim. This is deceptively simple, incisive and brilliant. It also serves as a good general guideline for which things one should seek to insure and which things one should budget for. Your subsequent posts add to its usefulness. Nicely said. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [April 4, 2012, 3:04pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/66 "2012-04-04T15:04:00Z")
Except for the part where it isn’t true. Go ahead and find me a person who hasn’t filed an auto insurance claim after 20 years of driving. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [April 4, 2012, 6:20pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/67 "2012-04-04T18:20:47Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Except for the part where it isn’t true. Go ahead and find me a person who hasn’t filed an auto insurance claim after 20 years of driving. I think that for equivalence, you’d have to compare those who would buy health insurance the day before starting chemo and those who would buy auto insurance they day before the accident the _know_ they are going to have. ---
**Author:** ![Mdcastle](https://avatars.discourse-cdn.com/v4/letter/m/958977/32.png) [@Mdcastle](https://boards.straightdope.com/u/Mdcastle)\ **Post date:** [April 6, 2012, 1:33am UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/68 "2012-04-06T01:33:45Z")
I got two rates from my company. For a plan that basically covers everything (maternity, chemical dependency, mental health included, no lifetime maximum) for a 40 years old non-smoking male is $3600 per year for a $1000 deductable / $2000 out of pocket and $1300 per year for a $15,000 deductable and out-of-pocket. I don’t know what the overhead is for individual plans, but 10% is a nice and round, and a close number to what the number is companywide, so it’ll cost the average person $230 to have the insurance pay for non-catastrophic expenses rather than pay them themselves. (10% of the $2300 difference in premiums). Is non-catastrophic coverage a scam then? I don’t know. Some people can’t afford the $15000 loss. Some people will pay the $2300 even if they could afford a catastrophic loss just because they prefer the sure thing of at most $5600 in expensese rather than $16,300. Some small, for-profit HMOs can have up to 30% overhead, maybe that changes things. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [April 6, 2012, 8:29pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/69 "2012-04-06T20:29:10Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Well, that’s a nice attempt at an analogy, but it doesn’t work because I don’t come with parts that are designed to wear out, and there are no warranties covering any of the others. Don’t come with parts that are designed to wear out? I’m guessing you aren’t as old as I am. Which is the point, actually. Most people own their houses for decades and never file a fire insurance claim. It is very rare that you will never file a major health insurance claim. Only happens if you manage to die, quickly, at a fairly young age. Think how much we’d be paying in premiums if the insurance companies had to pay for the over-65 crowd too. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [April 6, 2012, 8:30pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/70 "2012-04-06T20:30:23Z")
> [@jasg](#): > > I think that for equivalence, you’d have to compare those who would buy health insurance the day before starting chemo and those who would buy auto insurance they day before the accident the _know_ they are going to have. Which is what the mandate is all about. And you don’t have to buy it before chemo, you just start when you are old enough that the odds you are going to need it are good. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [April 6, 2012, 8:51pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/71 "2012-04-06T20:51:46Z")
> [@jtgain](#): > > It’s no more unclear than your homeowner’s insurance. Your homeowner’s insurance doesn’t cover light bulbs and a/c filters. You know you will need them. It does cover fire damage because that is an unknown that most people can’t afford to pay out of pocket. Your health insurance doesn’t cover aspirin, allergy medicine, and tissues either. > [@](#): > > Only it would be like if in the homeowner’s example, we paid for poor people who couldn’t afford new central heat in the winter time. And we also paid for people who refused to buy warranties that could afford the warranty payments. We recognize that this is a problem. However, instead of correcting the problem, and requiring those that can afford it to make catastrophic payments, we mandate that all homeowners buy insurance that requires an electrician to come in a replace a light bulb free of charge. If not replacing the light bulb vastly increased the chance that your house will burn down, the insurance companies would start covering it. > [@](#): > > It’s a basic insurance principle: You can only insure against fortuitous events. If you KNOW that you are going to get into an accident tonight that is your fault, you will beef up your insurance coverage. The whole system fails. > > Just like you KNOW that you will need doctor visits and prescription medicine. If you try to insure against that, you will pay full cost, plus insurance (or government bureaucracy in single payer systems) overhead expenses, because that’s exactly what the third party expenses are. In the long run you don’t know if you will ever cash in on your fire insurance. Most people don’t. In the long run you do know that you will cash in on your health insurance. That is a significant difference. Obviously you don’t really get free doctors visits, since the cost comes out of your insurance premiums, which are higher. This one is a pretty well understood cost. You are right that you pay overhead for this privilege - on the other hand you also get the benefit of negotiated discounts, so it kind of like Costco. You also get more predictable payments, and you lack one disincentive to get a checkup, which contributes to the general health of the population. > [@](#): > > And you can’t compare other countries to the United States. It is well-settled that drug manufacturers sell drugs at a discount to countries like Canada and the UK and at a huge discount to developing countries. So much so that a recurring debate is when the government tries to buy prescription drugs BACK from Canada because they’ve purchased them at a government mandated discount. > > Drug manufacturers are able to do this because they can make profits off of the free market U.S. system. You don’t like drug manufacturers and their profits? Then you won’t like the new meds that might save your life, or the new erection pill that improves the quality of your sex life. If the money isn’t there, it won’t be created. > > So, in my fiefdom, insurance would be divorced from employment entirely. No reason for me to get fired and have to lose my house or car insurance. The routine health care items of life like doctor visits and prescriptions should be paid out of pocket, open to the free market with prices being advertised and negotiated. Drug laws should be largely reformed so that I don’t have to go to the doctor for a medicine I know I need. If I know how to rewire the kitchen light switch, I don’t need to call an electrician; I can do it myself. I assume you must work for a drug company, otherwise I can’t imagine why you think that those of us in the glorious free market being ripped off is a good thing. If drug companies had to negotiate with the US government they would no doubt decrease our prices and increase those charged to Canada somewhat. The US government, through NIH, already subsidizes drug companies in that they don’t have to pay for high risk fundamental research. This is good. In any case, they spend more on marketing convincing me that I have to worry about the scourge of toenail fungus than on R&D. I believe that drug companies cannot advertise prescription drugs in some European countries. Drug companies have this big advantage. If I don’t buy an iPad, I’ll be just fine. If I don’t buy my heart medicine, I can wind up dead. They should be able to squeeze out a profit in this kind of a market. We can buy plenty of drugs that are in the order of rewiring your switch. But more extensive electrical work requires a permit and a license, just as more extensive medical work requires a permit and a license. I take drugs that do odd things to my heart’s electrical system - I don’t really want to risk figuring that out myself. > [@](#): > > Only for the unexpected should we risk pool our money. And as harsh as it is to say, there has to be some kind of cost control at the upper end (don’t ask me how to implement it). I know that it is human life we are talking about, but we shouldn’t be spending tens of thousands in medical care for a 100 year old to get a pacemaker, anymore than you would spend tens of thousands to fix an old wrecked car. Ooh - death panels! While I agree, this has little to do with private health insurance. It would be nice if it were politically feasible to have this discussion, but you remember that Palin’s death panel lie wasn’t about this, but about paying to have an end of life discussion with your doctor. ---
**Author:** ![wolfman](https://avatars.discourse-cdn.com/v4/letter/w/a8b319/32.png) [@wolfman](https://boards.straightdope.com/u/wolfman)\ **Post date:** [April 6, 2012, 10:00pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/72 "2012-04-06T22:00:08Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Go ahead and find me a person who hasn’t filed an auto insurance claim after 20 years of driving. Did I misunderstand this? Are you saying there is no one who hasn’t filed an Auto claim? A huge majority of people I know have never filed a claim. ---
**Author:** ![glee](https://avatars.discourse-cdn.com/v4/letter/g/b5a626/32.png) [@glee](https://boards.straightdope.com/u/glee)\ **Post date:** [April 6, 2012, 10:16pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/73 "2012-04-06T22:16:58Z")
1. My current situation: - here in the UK we have the National Health Service. By prepaying through taxes, I’m covered for everything (until I’m 65, I pay towards prescriptions.) As I work at a Private School, I can also join a private health scheme (which costs me something as it’s a taxable benefit.) 1. Why I buy insurance: Whenever I travel to the US, I take out $1,000,000 of private health insurance. My government advises me to and the reason is to avoid going bankrupt if I have a medical emergency over there. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [April 6, 2012, 10:20pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/74 "2012-04-06T22:20:59Z")
> [@glee](#): > > 1. Why I buy insurance: > > Whenever I travel to the US, I take out $1,000,000 of private health insurance. > My government advises me to and the reason is to avoid going bankrupt if I have a medical emergency over there. What does that cost you, and for how long? ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [April 6, 2012, 11:36pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/75 "2012-04-06T23:36:51Z")
> [@glee](#): > > 1. Why I buy insurance: > > Whenever I travel to the US, I take out $1,000,000 of private health insurance. > My government advises me to and the reason is to avoid going bankrupt if I have a medical emergency over there. Good advice. On the other hand, when my daughter went to Germany for a year, she was able to buy insurance for some trivial amount a month - far less than she could get it here, despite being young and healthy. ---
**Author:** ![tumbleddown](https://avatars.discourse-cdn.com/v4/letter/t/e9bcb4/32.png) [@tumbleddown](https://boards.straightdope.com/u/tumbleddown)\ **Post date:** [April 7, 2012, 2:31am UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/76 "2012-04-07T02:31:15Z")
> [@Voyager](#): > > If people were rational economic actors, they’d happily pay the couple of hundred bucks for a preventative visit and stuff not covered by the catastrophic coverage, and budget for it. That’s loaded with assumption. I’m a 40 year old woman. “Preventative” care for me isn’t just an annual physical, but a physical with bloodwork including glucose and cholesterol screening, a ob/gyn exam with pap smear, a mammogram, an ophthalmological exam with dilation and glaucoma screen. That would be about $1,500, roughly, not a “couple of hundred bucks” and more like an entire month’s take home pay for an individual earning around the [median personal income](http://en.wikipedia.org/wiki/Personal_income_in_the_United_States). Rational economic actors look to maximize the value of their spending and limit their costs as possible, which is why, within our vastly imbalanced and unjust system, rational economic actors buy health insurance when they can. > [@Wesley\_Clark](#): > > So it isn’t as easy as high deductible plans. People who are barely making ends meet will not spend 5k a year on tests if they don’t 100% think they need them. People who are “barely making ends meet” won’t spend $50 on tests once, let alone annually, even if they _know_ they need them because it’s never just tests. Tests lead to a diagnosis. A diagnosis leads to treatment. Treatment costs money. If you don’t have money or insurance, why even go down that road. (Especially since until ACA, and maybe once again, an official diagnosis can stand in the way of ever getting insurance in the future.) ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [April 7, 2012, 11:33pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/77 "2012-04-07T23:33:09Z")
> [@tumbleddown](#): > > That’s loaded with assumption. I’m a 40 year old woman. “Preventative” care for me isn’t just an annual physical, but a physical with bloodwork including glucose and cholesterol screening, a ob/gyn exam with pap smear, a mammogram, an ophthalmological exam with dilation and glaucoma screen. That would be about $1,500, roughly, not a “couple of hundred bucks” and more like an entire month’s take home pay for an individual earning around the [median personal income](http://en.wikipedia.org/wiki/Personal_income_in_the_United_States). > > People who are “barely making ends meet” won’t spend $50 on tests once, let alone annually, even if they _know_ they need them because it’s never just tests. Tests lead to a diagnosis. A diagnosis leads to treatment. Treatment costs money. If you don’t have money or insurance, why even go down that road. (Especially since until ACA, and maybe once again, an official diagnosis can stand in the way of ever getting insurance in the future.) I was trying to show how even the make people pay for the cheap physical exam case wouldn’t work, but I agree with both your points. Exams costing more (as they do when we get older) is going to make it even less likely for people to get them. I went to my doctor to get a note saying that it was okay for me to donate blood, and before I knew it I was getting my heart rebooted. Perhaps people who’ve never been through the experience don’t realize that medical care is not bi-modal, either cheap or catastrophic. Even treatments that fall under the deductible can wipe out your finances. What I seem to get from opponents of ACA is it is all my fault for being 60 and your fault for being 40 and a woman. And it is the fault of those without enough money to afford health care. ---
**Author:** ![glee](https://avatars.discourse-cdn.com/v4/letter/g/b5a626/32.png) [@glee](https://boards.straightdope.com/u/glee)\ **Post date:** [April 7, 2012, 11:59pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/78 "2012-04-07T23:59:54Z")
> [@glee](#): > > Whenever I travel to the US, I take out $1,000,000 of private health insurance. > My government advises me to and the reason is to avoid going bankrupt if I have a medical emergency over there. > [@Fear\_Itself](#): > > What does that cost you, and for how long? For a month (including loss of baggage cover and cancellation cover), about £30 ($48.) The medical cover is now a standard $10,000,000. :smack: ---
**Author:** ![TomS](https://avatars.discourse-cdn.com/v4/letter/t/53a042/32.png) [@TomS](https://boards.straightdope.com/u/TomS)\ **Post date:** [April 8, 2012, 12:21am UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/79 "2012-04-08T00:21:25Z")
> [@curioushat](#): > > Hello, > > When an individual buys insurance, for example life insurance, one is paying a small premium to insure against a catastrophic event. In this case, dying. Everyone knows that on average, the insurance company makes more money than it pays out (being for-profit and all). However the risk is enormous; if we were to die then it would be immensely catastrophic for our family. For example paying a 10$ per month premium, over twenty years is only 2,400. Clearly even if we decided to do without the life insurance and pocket the 2,400, that does not even come close to covering if we die. > > However, with health insurance that is completely not the case. We are paying insurance for something that we know is going to happen. For example, prescriptions and doctor’s visits. The occasional visit to the specialist, too. Perhaps a minor surgery but the bottom line is that we are expecting these things to happen anyway, so why buy health insurance in the first place? > > For example my family of 6 pays 800$ per month for insurance, or $9,600 per year. Most years our healthcare would be around 4,000 out of pocket. So if we just saved up 9,600 per year for health care, we would save a ton of money. > > However, what I have heard from people is that if you don’t have insurance, what happens if you have an enormous hospital bill, major surgery, etc? Well then the obvious solution is to buy catastrophic insurance. Isn’t that what insurance is in the first place? A premium to pay to insure is against a catastrophic event? Not to pay insurance for things we are expecting to happen anyway? Why do we continue to allow health insurance companies to make huge profits off us on a yearly basis? > I may have not done the best job explaining myself so ask questions, I am curious for the responses. The insurance companies get paid for helping us distribute the costs evenly (as possible) among all of us. The healthy pay more and collect less -generally until later in their life, when they begin to collect more than they pay. All other things being equal, we should all benefit from this process, given that there is value in the freedom from worry about health care expenses. Hope this helps! (I’m also eager to hear from others on this.)… ---
**Author:** ![urban1a](https://avatars.discourse-cdn.com/v4/letter/u/e47c2d/32.png) [@urban1a](https://boards.straightdope.com/u/urban1a)\ **Post date:** [April 8, 2012, 2:01am UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/80 "2012-04-08T02:01:22Z")
I question whether the amount paid by a health insurance company on your behalf is the same as the amount you would pay for that same service without health insurance. I believe that insurance companies negotiate fees with providers and that these fees are lower than you would pay on your own. Without any cites, I suspect you would pay considerably more for doctor and, certainly, hospital costs if you had no insurance. Bob [Previous page](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414.md?page=3) [Next page](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414.md?page=5)