Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
So basically, I have to pay for others' lack of responsibility. Just great.
Well, it isn't just lack of responsibility. A lot of people simply don't have the earning power or the resources that you seem to have. One of the inconsistencies of the current model is that, on the one hand, we want to keep an essentially private health care system and private health care insurance approach while, on the other hand, as a society we are not prepared to let people suffer and/or die because they cannot afford treatment.
So does the need for health care which works against your argument. I consume a lot more health care now I am in my fifties than I did when I was 30.
Your argument is overly simplistic. There is not a one size fits all when it comes to choosing the right health care insurance plan.
No, it's not simplistic. I already said that it doesn't apply for people with ongoing health issues. The increase of costs with age is not as much as the premiums, because the middle man always gets a cut, on average (but yes, there are exceptions due to "insider" info.)
Well, I happen to have multiple years of the $25K deductible saved. I also would have the choice to change my insurance policy to a lower deductible if I really thought my issues would continue for the long term, or I otherwise exhausted my savings.
I guess my biggest annoyance is that the max deductible allowed by the ACA is $6K, because most Americans don't have much saved. Why should I be forced to pay more because most people don't save?
This is also a really good point - by paying out of pocket we would have a lot more motivation to negotiate prices lower. We'd also be free of the insurance company overhead.
My secret is that the only medical care I need is in a catastrophic event. Where can I trade that information? All legal health plans are too conservative for my risk level.
I think $25K is past the point where it makes sense, though. At $25K the opportunity cost of keeping $25K in cash is more than you are saving in premiums compared to a $6K deductible...
I think $25K is past the point where it makes sense, though. At $25K the opportunity cost of keeping $25K in cash is more than you are saving in premiums compared to a $6K deductible...
That's why you don't keep it in cash. If you invest all the money that would go towards the deductible (in this case $25K) in an index fund, and you invest much more than the deductible (let's use $100K in this case) then you're safe to cover your deductible even with a market crash like 1929.
It's all about managing risk. Buying insurance is an opportunity cost - you could be putting that money elsewhere. So you're best off putting as much money as you can afford elsewhere where it can earn the best return, and just liquidating some of those assets in the event of a unlikely catastrophic event. That way you can manage your deductible to be the maximum that you can afford, saving you the most money in premiums in the meantime (and investing those savings).
That's why you don't keep it in cash. If you invest all the money that would go towards the deductible (in this case $25K) in an index fund, and you invest much more than the deductible (let's use $100K in this case) then you're safe to cover your deductible even with a market crash like 1929.
It's all about managing risk. Buying insurance is an opportunity cost - you could be putting that money elsewhere. So you're best off putting as much money as you can afford elsewhere where it can earn the best return, and just liquidating some of those assets in the event of a unlikely catastrophic event. That way you can manage your deductible to be the maximum that you can afford, saving you the most money in premiums in the meantime (and investing those savings).
A lot of HSA's will allow you to do just this.
The argument is that if you use equities as an emergency fund you'd be forced to sell at a loss, but of course this depends on probabilities and your utility curve.
You don't compare opportunity cost of emergency fund to opportunity cost of premiums. It's either premiums vs. opportunity cost of EF, or opportunity cost of premiums vs. opportunity cost of opportunity cost of EF (if you want to compare apples to apples).
The argument is that if you use equities as an emergency fund you'd be forced to sell at a loss, but of course this depends on probabilities and your utility curve.
Well, I don't know that you would be forced to sell at a loss with 100% probability either. You could very well be selling at a peak. I don't think that the probability of having a medical issue would have much correlation with current state of the stock market. The main argument against using equities as an emergency fund is not having enough for rough economic times, so that's why you over-compensate by investing much more than your deductible.
Quote:
Originally Posted by ncole1
You don't compare opportunity cost of emergency fund to opportunity cost of premiums. It's either premiums vs. opportunity cost of EF, or opportunity cost of premiums vs. opportunity cost of opportunity cost of EF (if you want to compare apples to apples).
I'm a bit confused by your wording here.
In this case I was comparing the opportunity cost of the premiums to that of investing the money. Opportunity costs should always be compared to the best possible usage of that money - which would be investing it for the highest return. Of course those investments should also be evaluated for risk in themselves, but that's beside the point here.
I agree that holding money in cash as an emergency fund is a huge opportunity cost, and I wouldn't recommend it beyond a very basic general emergency fund, unless one has very little savings in entirety.
I believe something with really low premiums but really high deductibles are known as "catastrophic" insurance plans? This is mainly for young or otherwise healthy individuals who won't really see the doctor more than once a year, if even that. At one company a decade ago, this was free, with something like $6000 or $10K deductible (honestly can't remember), so if you were going to decline insurance coverage, you may as well go for this. Years later, it got increased to something like $10 to $15 a month. Still not too shabby
Low deductibles are a colossal waste of money in the long run, especially once you factor in just how much staff and how many hours in a medical clinic are spent on billing insurance for reimbursement. If the patient just freaking paid for it, you'd avoid all the nonsense!
Thanks to my old awesome pre-ACA policy my premature daughters 41 day NICU stay cost me exactly $1,000 out of a grand total of $127,000 dollars in total bills.
She turned out fine in the end but it was very touch and go at first, worrying about bills would have added much emotional strain.
Pretty good ROI on a (then) $700/month policy.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
