Cost of Premiums
The cost of health insurance premiums constantly rise due to inflation and individually as we age. Through the health insurance provider I currently use, an extremely healthy single male will pay $76,935.60 in premiums from age 20-64 for health insurance with a $750 deductible. For a couple who has children at home from ages 25-49, and continues with health insurance coverage until age 64, they will pay $192,020.40 in premiums for the family throughout those years.
Cost of Insurance & Deductible in case of Use
How much will it cost to be hospitalized, with or without insurance (based upon nationwide average costs)?
- Hospitalized for acute bronchitis - average charge: $9,888, but with my health insurance I would stand to pay $750 + 20% (up to $2,000), or $2,577.60, saving $7,310.40.
- Hospitalized for pneumonia - average charge: $21,388. With my insurance I would pay $2,750, saving $18,638.
- Hospitalized for a crushing/internal injury - average charge: $42,514. With my insurance, I would pay $2,750, saving $39,764.
- Now for a real example. I have a relative who recently was in a car wreck at 70 mph. He was life-flighted to a hospital, but luckily his injuries were limited to a broken femur and a cut artery on his head. They placed a titanium rod in his leg, stitched up the artery, placed him in the trauma center overnight. The next day he was in a regular room, and the fourth day after the wreck he went home (short stay!). Two weeks later he was back to work. Luckily, my relative had insurance. The average cost of a life-flight is around $10,000. The insurance company would only cover $2,000. The bills for the rest of the hospital stay were over $56,000. With his high-deductible insurance, having to pay the bulk of the life-flight, and with co-insurance he will probably have to pay around $12,000. That's much less than the over $66,000 he would have been facing otherwise! That difference will pay for many years of health insurance!
- The first doctor's visit plus the blood and other tests were billed at $355. The insurance company allowed $163.66 of this, of which my part was $56.36.
- The second doctor's visit was billed at $177. Our co-pay, $30.
- The third doctor's visit with blood work was billed at $128, of which the insurance company allowed $83.32, of which we paid $50.77.
- With insurance we paid $137.13 for the three visits, instead of $660, saving $522.87.
- With one monthly prescription at $50/month, with insurance we pay the first $250 of prescriptions and then 50%. With insurance we would pay $425 per year on this prescription instead of $600, a savings of $175. This doesn't take into consideration the amount saved on the prescriptions which went along with the doctors' visits.
Expenses in Need Without Insurance
This of course varies with what need or claim is being made. Our past year's health bill without insurance would have been $1,260. That's the health bill with just one prescription, three doctor's visits, and nothing nearly serious. That also doesn't include any physicals. Insurance would cover a physical up to $500 (for each of us) without any copay. Paying for our health needs without insurance is expensive.
Ability to Pay Without Insurance
Most people, including us, would be unable to easily pay for the cost of health care without insurance and without saving extra money just for that purpose. Especially if we were hospitalized or became seriously ill like my relative.
Ability to Self Insure
If we invested the amount we would otherwise spend on insurance (this year, $2,013.17), and paid out of the account for the cost of health care, this past year we would have invested a net of $753.17. Over 10 years, that amount invested at 5% would yield $116,953.95, which would cover the average cost of any of the top 259 causes of hospitalization. However, this type of investment would require us staying in extremely good health for several years to build such a fund. Self-insuring is mathematically possible, if we stay as healthy as the normal person and don't have any major health concerns in the next 10 years. However, I don't recommend self insuring because there is no guarantee that you will not have a major health concern for several years to build a fund. My relative in the car wreck was just 20. If he had begun building a self-insure fund two years ago, it would have been much too small to pay the bills. Additionally, if you become sick with an illness (such as a heart attack), not only will your self-insure fund be able to pay for the costs, but your illness would then be excluded from insurance coverage for several years or the rest of your life once you did get insurance! That's a dangerous risk.
Return of Payments vs. Premiums Paid In
It is very possible, feasible, and likely that we will pay in much more in premiums than we ever receive in return of payments. If one becomes seriously ill, this balance could easily shift in the other direction. Our health insurance has a lifetime payout maximum of $2 million - much more than we will pay in premiums.
1 in 8 women is diagnosed with breast cancer at some time in their life and 1 in 6 men with prostate cancer. 1 in 3 adults get the flu every year, which would of course cause the health bills that year to be more with extra doctor's visits. Each year 114,000 Americans get sick enough from the flu to be hospitalized for it. With the possibility of major health problems, the unlikelihood of self-insuring, and the extra stress, insurance looks pretty good.
Additionally, many jobs provide health insurance, and pay very little more if insurance coverage is declined. In those cases, considering all of these factors, it would be foolish to decline health coverage.
Based upon these considerations, I believe health insurance is really worth it. It provides protection to possibly cover extremely expensive health care. Health care is one type of insurance I deem worthwhile, especially if your workplace provides health care, or provides it at a discounted rate.
Note: costs of health care gained through this site.