# 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:** 15\ **Page:** 8
**Author:** ![Salvor](https://avatars.discourse-cdn.com/v4/letter/s/b5e925/32.png) [@Salvor](https://boards.straightdope.com/u/Salvor)\ **Post date:** [December 31, 2015, 3:02am UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/141 "2015-12-31T03:02:13Z")
> [@Little\_Nemo](#): > > What you’re saying does make some economic sense. Have a health insurance plan that has low terms and something like a ten thousand dollar deductible. You’d pay for all your routine medical expenses but you’d have your insurance available in case of some medical catastrophe. > > One problem I’d foresee is insurance companies might be reluctant to issue policies like this. From an economic viewpoint, a person who has a policy like this has an incentive to avoid routine health care (which he’d pay for) in preference of waiting until he’s really sick (which would require expensive treatments the insurer would partially pay for). Obviously there are counter-acting factors of well-being and the deductible, but in general medical insurers would prefer to pay for preventive care incentives rather than reactive care. Your potential problems are the real issues with going to just catastrophic coverage. This is something conservatives love as an alternative as it’s cheaper than full care, but the result will just be poorer and more cash strapped people choosing to stave off doctor visits to save money. This can and will produce worse results if going to the doctor was not an out of pocket expense. There are solutions to this, Singapore seems to have government MANDATED health savings accounts that confiscate around 20% of your wages and store it away into a health account. I believe this can be pooled and accessed by family members. The benefit here is that going to the doctor for incidental issues will draw from the mandated savings account and not your own general funds that people tend to allocate towards other more pressing things. The libertarian might retort that, well, they SHOULD prioritize for potential healthcare expenses. True, and people should be kind to each other as well, but let’s not construct society as if what should happen is what will happen. Especially for delayed feedback effects like health issues that come abruptly without the kind of learning curve feedback that can train people to get on top of those things. Conservatives have poisoned me, I listen to so much talk radio I am reflexively trying to preemptively counteract their confused conceptions of the world. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [January 5, 2016, 4:15pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/142 "2016-01-05T16:15:03Z")
> [@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. Health insurance is frequently purchased with before tax income. There is a trend in health insurance towards catastrophic coverage. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [January 5, 2016, 4:16pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/143 "2016-01-05T16:16:39Z")
> [@jasg](#): > > It depends on where you live. > > In Washington state, I pay $279/month for a policy with a $3500 deductible, 50% co-insurance and a $5000 max out-of-pocket costs. It also includes an annual checkup and even covered a shingles vaccination. (I’m 63 - it would be a lot cheaper if I were younger.) > > So, after I pay $6500 in medical costs, the insurance company covers everything. > > It is coupled with an HSA, so I can put away pre-tax dollars to use for medical expenses (even for Medicare when I get to that point). That is typically what we call a catastrophic care health plan. Most HSAs are. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [January 5, 2016, 7:23pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/144 "2016-01-05T19:23:50Z")
> [@Damuri\_Ajashi](#): > > That is typically what we call a catastrophic care health plan. Most HSAs are. Yep, that was four years ago, prior to the ACA so I took a risk on a cheap policy that might have been cancelled if I had a major illness. Now I have permanent coverage for $198/month that cannot be cancelled and does not limit me to particular providers or pre-approvals. My deductible is $2180. (Medicare + Medigap F + Part D) ---
**Author:** ![lance\_strongarm](https://avatars.discourse-cdn.com/v4/letter/l/87869e/32.png) [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)\ **Post date:** [January 6, 2016, 2:19pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/145 "2016-01-06T14:19:08Z")
> [@jasg](#): > > Yep, that was four years ago, prior to the ACA so I took a risk on a cheap policy that might have been cancelled if I had a major illness. > > Now I have permanent coverage for $198/month that cannot be cancelled and does not limit me to particular providers or pre-approvals. My deductible is $2180. > > (Medicare + Medigap F + Part D) Medicare? B-b-but that’s government-run insurance! It must be horrible! You’re sure to die within the year. ---
**Author:** ![bump](https://avatars.discourse-cdn.com/v4/letter/b/7c8e57/32.png) [@bump](https://boards.straightdope.com/u/bump)\ **Post date:** [January 6, 2016, 2:56pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/146 "2016-01-06T14:56:35Z")
> [@InsideInformer](#): > > As for medications, they usually get you at the Pharmacy as well. Most prescriptions are inexpensive ($4 to $8 for a one month supply) Yet most prescription Co-Pays run $10 and up so the insured actually pays MORE than the uninsured cash customer. As for the more expensive medications, they are either not covered by most plans, or only available through the insurance mail order pharmacy partner that charges the company 50% of the retail cost. Have you never had the pharmacy point out that paying up-front is cheaper than going through insurance? I’ve had them point that out to me several times with generic medications for my children, like amoxicillin and things like cough suppressants. From what I can tell, where the pharmacy portion of the insurance really “gets” you is in the composition of their formulary. Your Dr. may look at you and decide to prescribe you Diovan for your high blood pressure, and then you find out that you’ll pay 70% of the prescription because it’s in some odd category on the formulary. Point this out to your Dr., and he may change your prescription to Losartan, as it’s in the 100% covered category on the formulary. That’s what I don’t much care for- the insurance companies effectively making treatment choices for the doctors. I know that neither you nor the doctors are required to follow the formulary, if you’re willing to pay full price out of pocket, but who really is willing to do that? So you’re both hamstrung by what the insurance company thinks is appropriate for your condition, regardless of what your doctor may think. I’m an advocate for universal health care, if only because it’s a way to cut the Gordian knot of health care cost increases and Byzantine insurance regulations and the sort of accounting-based care I detailed above in my prescription example. But the fundamental problem is that the information for the consumers is woefully incomplete- you can’t make an informed decision with what’s available to you, and even when you can, it’s still ultimately a gamble, like all insurance is. And with most of the US population being barely educated and kind of stupid, it’s not surprising that people don’t understand how all this works and aren’t making good decisions with respect to it. It’s not easy to determine the best insurance plan at all- my company now has 5 separate plans- a high deductible, a 80/20, a 90/10 and a 95/5, all with slightly different stipulations. I’m a veteran database programmer and data modeling guy, and it took me days to gin up a spreadsheet that could even begin to compare apples to apples on these plans. And even then, which plan was the cheapest overall was highly dependent on the magnitude of the claims that were billed back to the insurance. It literally was a situation where for different total claim amounts per year, different plans were cheapest. So I sort of guestimated what our usual annual claim amount is, and chose based on that. But I don’t expect some guy who stands there and says “Welcome to Costco. I love you.” all day to have the skill or wherewithal to crank out a spreadsheet like that. He’s just essentially taking a monster guess as to what might be his best deal in a situation like that. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [January 7, 2016, 3:36am UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/147 "2016-01-07T03:36:33Z")
**bump** , I’m trying to figure out how and where to save and repost post #146. Well said. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [January 9, 2016, 11:59am UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/148 "2016-01-09T11:59:46Z")
> [@InsideInformer](#): > > … As an example, say a doctor’s visit runs cash customers $100, you will see your insurance billed at $400. Since most policies cover 80% you will pay $80 out of pocket, and while your insurance shows you that they paid the $320 difference, they actually only pay the remaining $20.00 of the true service price. Yes it is dishonest, but the Health Insurance companies must build a perception of value for the high premiums paid. You’re saying the insurance company pays $80 but shows you paperwork implying they paid $320? Sounds like severe fraud to me. Do you have a cite? ---
**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:** [January 15, 2016, 8:01pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/150 "2016-01-15T20:01:31Z")
You won’t get it, because it isn’t true. Insurance will be billed $400. The explanation of benefits will show the amount _you_ paid, the insurer’s contractual adjustment of the remaining balance, and the amount the insurer _actually_ paid (which will be - surprise! - the amount they actually paid). ---
**Author:** ![GrumpyBunny](https://avatars.discourse-cdn.com/v4/letter/g/bc8723/32.png) [@GrumpyBunny](https://boards.straightdope.com/u/GrumpyBunny)\ **Post date:** [January 16, 2016, 2:54pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/152 "2016-01-16T14:54:18Z")
> [@jasg](#): > > [Here](http://www.businessinsider.com/cost-of-health-insurance-around-the-world-2012-4) is an interesting comparison of health insurance costs around the world, as analyzed by the Deutsche Bank’s Global Markets Research Team. > > The US is number 1! And we aren’t number 1 in outcomes! ironic, isn’t it? ---
**Author:** ![Dokall](https://avatars.discourse-cdn.com/v4/letter/d/e36b37/32.png) [@Dokall](https://boards.straightdope.com/u/Dokall)\ **Post date:** [November 25, 2017, 3:48am UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/153 "2017-11-25T03:48:34Z")
> [@mozchron](#): > > I had cancer at 17 and would have been dead by the age of 20 If I hadn’t had health insurance (thank god for COBRA!). The followup over the years is probably several million dollars. > > My daughter had what looked like a scary heart condition at birth. After $15,000 of diagnostic tests, turns out it was nothing (Yay EKG artifacts!). My out of pocket was about $100. > > I will never pay as much into my insurance plans as I’ve taken out of them. > > Maybe you should hope for a serious illness for yourself and your family? Then it will feel like less of a scam. You sound like a typical over emotional ruled by fear idiot. You think that’s disrespectful? Well have some respect and read what the guy actually said. He recommended catastrophe health insurance to cover exactly what you’re talking about, did you even read that part??? Besides, you are the exception to the rule, MOST people are being ripped off for everyday health care. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [November 25, 2017, 5:01am UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/154 "2017-11-25T05:01:04Z")
> [@Dokall](#): > > You sound like a typical over emotional ruled by fear idiot. You think that’s disrespectful? Well have some respect and read what the guy actually said. He recommended catastrophe health insurance to cover exactly what you’re talking about, did you even read that part??? Besides, you are the exception to the rule, MOST people are being ripped off for everyday health care. Welcome to the Straight Dope. We do not permit personal insults in this forum. Please read and familiarize yourself with the rules stickied at the top of the forum. Future personal insults will not be allowed. [/moderating] ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [November 26, 2017, 4:49am UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/155 "2017-11-26T04:49:44Z")
> [@Dokall](#): > > You sound like a typical over emotional ruled by fear idiot. You think that’s disrespectful? Well have some respect and read what the guy actually said. He recommended catastrophe health insurance to cover exactly what you’re talking about, did you even read that part??? Besides, you are the exception to the rule, MOST people are being ripped off for everyday health care. You realize that under Obamacare, all health insurance companies must pay out 80%+ of all its premiums in health care benefits or it must rebate all its policy holders. This is the percentage that the insurance companies picked because virtually all large insurance companies were comfortably within this medical loss ratio. So on average the pool of people being insured are being ripped off to the tune of less than 20% of the money they pay (and in many cases its a lot less than 20%) to pay for the reserves and the overhead. The person who gets cancer might be getting tons of benefits but its a lottery, he got cancer and got really good value for his insurance premium and you didn’t get cancer and have to live with the fact that you may never get cancer and get to take advantage of all that insurance coverage that you’ve been paying for year in and year out. Its sort of how all insurance works. You pool money and pool risks and pay out to the ones who need the payment. ---
**Author:** ![Napier](https://avatars.discourse-cdn.com/v4/letter/n/ce73a5/32.png) [@Napier](https://boards.straightdope.com/u/Napier)\ **Post date:** [November 26, 2017, 4:45pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/156 "2017-11-26T16:45:01Z")
Of course, zombies wouldn’t get nearly the benefit of health insurance. ---
**Author:** ![SamuelA](https://avatars.discourse-cdn.com/v4/letter/s/c77e96/32.png) [@SamuelA](https://boards.straightdope.com/u/SamuelA)\ **Post date:** [November 29, 2017, 7:18pm UTC](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414/157 "2017-11-29T19:18:16Z")
> [@Martin\_Hyde](#): > > If we _only_ were enrolled in “catastrophic loss” plans, and we were given back our monthly insurance premium _and_ had our wage increased by whatever amount that employers were spending on our health coverage, and saved that amount over the course of our lives, I believe the average middle class American would be $1.2-1.5m wealthier. One little snag : if the employer were to give back what it spends on our health insurance, we’d have to pay tax on that. Given that it’s about 20k+ these days per employee, only really high paying jobs even _have_ health insurance as a benefit. So those taxpayers are already paying on the order of 40-50% tax. That’s 15% payroll tax, 25% federal income tax, and many of these higher paying jobs are in blue states, so around 5% state tax. So the average taxpayer would pay almost half that million dollars away in tax. The way a liberal site like Huffington Post would put it is that middle class taxpayers are being subsidized to the tune of tens of thousands of dollars a year so that they can have healthcare. (by not being taxed on that part of their salary). This is an arguable point but is more or less true from a mathematics sense. [Previous page](https://boards.straightdope.com/t/health-insurance-is-a-scam-why-do-people-buy-it/617414.md?page=7)