Why Buy Health Insurance?

Let me preface my question by saying I hope that I can generate some factual replies and not launch into an endless debate. I really am looking for some genuine answers on what is admittedly, one of the hottest hot button topics.

Why does health insurance make any sense for consumers?

It seems to me that the vast majority of people – upwards of 95 percent – pay more out in premiums than they consume in health care. According to USA Today, the average cost of individual coverage was $4,824, and the average family plan $13,375. If you are relatively healthy, an annual physical and a few sick visits would only cost about 25% of what you actually pay. It makes more sense to pay out of pocket.

Of course, the reflex answer is that you need insurance in case of a catastrophic illness. But, as anyone who has actually experienced such a thing can tell you, insurance companies set limits (30-days of hospitilization, annual $ max, etc.) that only cover a small portion of the expenses in such circumstances. And if a catstrophic illness is going to force you into bankruptcy (60% of US bankruptcies are driven by medical bills, 75% of those people had insurance), it doesn’t really matter if insurance pays the first $100,000 of your $500,000 hospital bill… you are still going to lose all of your assets.

The only way that you can anticipate to break even, to get as much in services as you pay for, is if you have some sort of chronic condition. But again, the health insurance companies simply drop people with expensive ailments.

So help me to understand… as a consumer, how does it ever make sense to pay for health insurance?

It makes sense as an individual because self-pay people get reamed. You don’t pay your insurance company’s cost, you pay, like, eight times that for everything.

For one thing, paying through an insurance company gets you huge discounts. Each time I get a statement, it shows the original service price, the “negotiated” price for the insurance company (frequently half or less than the original price), and the amount of that negotiated price that I need to pay myself after insurance. Paying the *original *cost out of pocket would have been beyond my means.

A question for you: were you paying a premium equal to what the average cost was when you had your affliction and the insurance company paid out the policy limits?

I would suggest that even with crappy policies, the policy maximum is still far greater than most people can afford to take a hit to their assets.
Zsofia and Tim R. Mortiss brought up the other half - contract rates for services. I find it seriously problematic, but that’s one of the major reasons health insurance is rationally purchased.

Well, as sucky as private insurance can be in this country, it’s still better than the alternative, which is paying out the ass if you ever need to go to the emergency room. You’re right that if you ever do come down with a catastrophic illness there’s a good chance you’d end up going bankrupt regardless of whether or not you have insurance.
But say you come down with a serious case of kidney stones on a weekend in the middle of the night and fear it’s something more serious (this happened to my wife several years ago). You could either end up paying several grand for the few hours you’re going to spend in the ER or pay about $175 out of pocket (like we had to) if you have insurance.

Not all plans have limits. My hospital bill from my accident was over a million, our co-pays were a few thousand during my stay and the 3 years of treatment after.

A fair question, because lower premiums mean less coverage. We pay about $9k a year for our family plan. My 14-year old daughter spent 105 days in the hospital this year and the policy only covered 30. Our bill is over $200k. I’m not sure a more expensive plan would have covered more… but this is employer-subsidized insurance and there were only two options offered. We took the pricier one.

When I was self-employed about ten years ago, we paid for everything out of pocket. While I know I paid more for an office visit than an insurance company would have, my total out of pocket cost for the year was still much less than a full policy would have cost. That’s why we went that route.

If we had been un-insured this year, our bill would have been $300k rather than $200k… but it might as well be a billion.

People get hurt and in accidents. Bust up a knee playing softball and watch the cost. Fall off a ladder while painting your windows or cleaning your gutters. Things happen and they also happen to young and healthy people.

There’s a huge range in between those two extremes. Take your average trip to the ER for breaking an arm. After X-rays, pain medications, setting the bone, the cast, and so forth, you’ll be charged a several thousand dollars. Not enough to bankrupt most people, but definitely a significant expense. With even a shitty insurance plan, you’ll probably only pay a few hundred out of pocket for basic emergency care.

Not true. What my doctor charges me as an individual is almost half what he charges an insurance company. Same for my dentist. When I dropped Cobra for personal insurance I saved $5,000 a year.

Interesting.
my dentist told me he signs a contract with the insurance company that they get x% off his lowest price. If he offered me the same as what the insurance company pays, it would be fraud (his words, I assume he meant he would be subject to a lawsuit and of course losing access to that insurance company). I don’t know whether he was telling me that just to justify the cost or whether it is true-but it sounded reasonable and since I was covered by insurance the dentist was getting the insurance payment no matter what he said. I would be interested in hearing from others with knowledge of the business.

There are some catastrophic illnesses where insurance comes in handy. A guy I know says his gf who is in her 20s had a severe illness and ran up $400,000 in medical bills. He claims private insurance paid pretty much all of them.

If you can find high deductible insurance (a plan with a $2000-7500 deductible costs about $70/month in my experience for an individual policy) that covers catastrophic health care in a comprehensive way, and you use the savings from the higher deductible to pay for out of pocket medical expenses then it is worth it. But that is the only situation I can think of where insurance is worth it. And that assumes there will be no denials or rescissions.

Sorry for the slight hijack: I live in the UK, and I can’t tell you how terrifying I find this kind of scenario. :frowning:
To the OP though: doesn’t a lot of health insurance come bundled along with a job contract at a company? In that case you wouldn’t have much of a choice to make, you’d just get it as a job benefit.

In some sense, by purchasing insurance you’re insuring your insurability. I.e., once you have a pre-existing medical condition, you have a much harder time buying insurance at a future date. So, if you have insurance when you’re healthy, you’ll have it when you are sick (except in the all-too frequent case where you get denied coverage by the insurance company).

And what the insurance company remits to your doctor is half of what he charged you. (obviously the numbers aren’t accurate, rather there is a large difference between the submitted bill and what insco. pays as its contract rate)

Most employer sponsored packages are optional, and you are still required to pay premiums out of your paycheck. It is pre-tax earnings, but they still eat up alot of a paycheck, especially if you’re working at minimum wage.

(off topic, but this is one of the problematic things about the way we deliver healthcare in this country)

Basically, health insurance is a gamble - you’re betting on your own bad health. That is, you’re betting that your health costs out-of-pocket would exceed the cost of your insurance. For young, healthy people, the OP is right - it’s probably a bad bet. Sure, we can get hit by trucks or whatever - but we generally don’t, and so our health care costs out-of-pocket aren’t that intense. But eventually, we get old enough that parts start crapping out - and once that happens, health insurance becomes a lot more sensible.

It’s also an unfair bet for society to book.

Young people who voluntarily go without health insurance and suffer illness will essentially offload all of the costs of their medical care onto society through the bankruptcy process - they have no assets (generally) to speak of so it’s a no-brainer gamble for them.

Frankly, they ought to be forced to buy healthcare (or, you know, have UHC), as is suggested.

Don’t you mean several 10’s of thousands of dollars? Boss broke his wrist. I believe that was about 30 grand. My simple shoulder surgary was about 40g (outpatient). My Wife had a pin put in her thumb. that was 50g.

That’s what I’m seeing. And my experience is that the insurance companies are getting shafted. And so are the people that pay for insurance. Those that have no insurance can settle for much, much less. Not the other way around.

You can’t even look at an emergency room for less than $5000. Shit, an aspirin is going to cost $100. It’s obsene.

Looking at a real example from 2008 my doctor charged $75 to the insurance, I paid 20 in copay and the insurance paid $40.86 for a discount of $14.14.

$20.00 copay 26.7%
$40.86 insur 54.4%
$14.14 disc 18.9%
$75.00 Total

Currently my doctor charges $85 for which I pay $50 which is 58.8%. That is less than the combined rate of 81.1% that the doctor was receiving before.

The difference between what I pay and what the insurance paid is 4.4% That doesn’t justify the $5000 difference between cobra and a regular insurance policy with a $5,000 deductible.