Insurance is about spreading risks. A bunch of people buy insurance against a risk that they will get hit with a major claim, most of them won’t a few of them will. We have insurance against the loss of our homes, as that is a major purchase, that we cannot just buy another one. It takes most people 30 years to pay off their home. We also acquire stuff over the course of time that adds up, like business suits, furniture, and electronics.
We have insurance against automobile crashes. Two types of insurance both on your car and if you unfortunately hit someone else’s. Those could add up to thousands and thousands of dollars. We do not insure for the maintenance of our home or car. We insure expensive jewelry and sometimes fur coats. We have life insurance to make up for the loss of earnings of a family member to be sure the family is secure in the event of an untimely death.
What you should not insure are things that either you can budget for out of ordinary expenses or things that do not cost a lot to replace. You would not insure something in most cases that cost under $100. Heck, now with homeowners insurance you have a deductible of $1000 in most cases so you probably would not insure anything under $1000.
Health insurance, however keeps going the wrong way! For many years, health insurance has covered the little things such as doctor visits, which might cost $150 or less. It has covered the emergency room which might cost $1000 or less. Now under the Patient Protection Affordable Care Act (PPACA) we now get all preventative care covered as well. This is what drives up the cost of insurance. The more cover the more it costs.
I for the last decade have had a High Deductible Health Savings Account. Until the PPACA passed it was a $5000 family deductible then 100% coverage. I paid for everything under $5000. I was ok for that as for a family of 4 was paying under $300 per month and we had few claims. We never hit the deductible in ten years. I would guess we paid out under $5000 for the entire decade in claims. If I get a sore throat, I do not run to the doctors, I wait a few days, then if I am not better I go to the doctors. When the PPACA passed it then included preventative care so the cost went up. I raised my deductible to $5200 and kept it near $300. Then in 2014 my plan was cancelled. I found another plan with a $6000 family deductible and the price was $450. This year it is going up to over $550 per month. It will be cancelled at the end of 2016. I am guessing it will go up another $100 a month by then.
If I were to convert today to a similar plan through the ACA (you cannot purchase the plan I currently have as none of those plans are still for sale), would be astronomical. First of all the $6000 deductible is not a family deductible it is an individual with a family deductible of $12,700. It would cost over $800 per month. Now the new plans would cover “wellness” such as physicals, and pap smears and colonoscopies. But again, as a family we have had less than $5000 in claims in a decade, is this worth the extra preventive care? I can pay $100 for a doctor visit. My son broke his ribs this year it cost me $2000. Again, while I was not happy to pay that, it is not a claim that is going to send me into bankruptcy. Think about this an $800 per month premium is $9600 per year, then if you add in the $12,700 family deductible if it were to be needed would cost us over $22,000. Please tell me again how any of this makes financial sense? Again, insurance for things you cannot pay. I can pay $6000. A $12,700 claim would hurt me for a long time. I hope the law gets changed before my policy terminates at the end of 2016.
The focus of health insurance should not be on the basic services that we can afford. It should be based on the things we cannot afford. As soon as we realize that Health Insurance should be treated like all other types of insurance, you will see rates not only stabilize, but they will have to come down.
Eric Wilson
isellhealth.com