Tuesday, October 27, 2009

Change Your Insurance Expectations

Lets think for a moment about insurance. What are things you pay to have insured? You want to make sure you have life insurance to protect against the unlikely event of your death. (assuming you are in good health. If not you couldn't afford the premiums.) You want to insure against the unlikely event that some natural disaster such as tornado or perhaps a fire destroys your home. So you need home owners or renters insurance. You insure your car against the unlikely event that you lose control of your vehicle and create a new drive through window at a local convenience store. Insurance is designed to protect you from liability should some unlikely, but financially devastating circumstance occur in your life.

Have you ever wondered why you don't buy tire insurance. Just pay the premiums and if your tires wear out you can just pay the co-pay. There will of course be a small deductible. You don't because it is not unlikely that your tires will wear out. In fact it is an absolute certainty that sooner or later you will need new tires.

Insurance should be treated the same way. You know with absolute certainty that you and your family are going to need to see the doctor for minor cases of bumps, bruises, coughs and colds. Yet for some reason we want to purchase insurance to cover the costs. It doesn't make financial sense. Let me break it down for you.

Seeing the doctor = x
If you see the doctor and pay the bill yourself :

Your Bill = x.

If you buy insurance to pay for routine office visits you will pay the insurance company via your premiums:

premiums = x+administrative costs+profits.

Face it insurance companies are not in the business of loosing money. They are in the business of making money. If they are going to pay for your routine office visits which you KNOW are going to occur, you will pay more than if you paid them on your own.

The obvious flaw here is that the doctors' offices agree to take a smaller percentage of payment from the insurance companies for a visit and for certain procedures in exchange for guaranteed payment. However, You can do that on your own. Doctors offices are willing to take less if you ask. But you have to ask, then make payment in full. Start a health savings account to pay for routine office visits for you and your family. Then purchase a catastrophic health insurance plan to insure you against the UNLIKELY event that someone in your family be diagnosed with something as costly as cancer.

If you buy your own insurance this will save you money. Do the math. Even if you have a broken arm it is still cheaper to pay for it on your own than pay the huge costs associated with the "pay-for-everything insurance plans".


Anonymous said...

Its a businesses. They wouldn't do it if they couldn't make money at it.

I just wish the restrictions that limit the competition in this market would be lifted.


Anonymous said...

"Start a health savings account to pay for routine office visits for you and your family."

I may be wrong because the bill keeps changing, but I believe one of the certainties of Obamacare is that Democrats will be doing away with health savings accounts.

You see, they dont WANT Americans paying their own bills. Paying your own bills gives them no power over you.

And since the stated purpose (see video on our blog) of the "public option" is to drive up the cost and regulatory burden of private care and force people onto goverment care by getting your employer to dump your insurance, outlawing "health savings accounts" only makes sense. They are counterproductive to the intended goal of single-payer socialized health care.