Health insurance for millionaires?
September 19, 2013 8:45 AM Subscribe
Unfortunately we did not win Powerball last night but it sparked an interesting conversation. Do wealthy (US) people have health insurance? I would think that once you hit a certain amount of wealth you could go ahead and drop it, right? Like $50 million or so? Which made us discuss how someone like Sunny von Bulow could be kept in luxurious surroundings for most of her comatose life. Would her family have paid out of pocket or are rich people dealing with same health insurance BS that the rest of us do? I mean she was in a coma for years, it had to have cost a small fortune.
There's a thing called concierge medicine that's part of this. Short version: they still have health insurance, but it's more expensive and provides a higher level of service, largely in the preventive aspects. It's a shift from "What if I get some expensive (and horrible) disease?" to "How can I keep from getting some horrible (and expensive) disease?"
posted by Etrigan at 8:54 AM on September 19, 2013 [1 favorite]
posted by Etrigan at 8:54 AM on September 19, 2013 [1 favorite]
Anecdotal, but some wealthy folks will set up S-corps or LLCs, one benefit of which is getting a employer (e.g., the family office) sponsored health plan. Since they're wealthy, they can opt for a high-deductible plan, which would be less expensive and may come with other perks (e.g., health savings account (which is not the same as an FSA)).
Of course, if your wealth came from owning a company, you'd just get a Cadillac plan through the firm.
Certainly if you had $50 million to spare, you would have a financial advisor who would make the economically rational decision to pay for health insurance rather than just cover all medical expenses out of pocket.
posted by Admiral Haddock at 8:56 AM on September 19, 2013 [4 favorites]
Of course, if your wealth came from owning a company, you'd just get a Cadillac plan through the firm.
Certainly if you had $50 million to spare, you would have a financial advisor who would make the economically rational decision to pay for health insurance rather than just cover all medical expenses out of pocket.
posted by Admiral Haddock at 8:56 AM on September 19, 2013 [4 favorites]
I have a friend who is literally worth 9 figures. He has health insurance and home insurance as well as liability insurance. And life insurance. He has 5 kids and is around 50 years old. It makes financial sense to him to do it. Paying the non-negotiated rates are much higher than paying insurance. As he says, just because I can afford to not be insured doesn't mean I should. He says that he could buy a new car every month but he doesn't just because he can afford it. Same thing with almost all of his expenses. I have never seen him shop around for cheap gas, but he is economically rational. Where his wealth comes into play would be if he hit some sort of annual max or if there was a treatment not covered by insurance that he thought necessary, he would just get it.
posted by JohnnyGunn at 8:58 AM on September 19, 2013 [6 favorites]
posted by JohnnyGunn at 8:58 AM on September 19, 2013 [6 favorites]
Right - its not that you don't have health insurance, its that the health care providers likely don't take insurance (although the hospitals do) - so you favor a plan with high deductibles and some level of co-insurance.
Basically you self-insure up to a relatively high level (a few k a year) and then have insurance that starts to pick up above that level. You also usually make sure that spend is pre-tax - which has a high value to you if have a 50%+ marginal tax rate.
I think the concierge medicine thing is lot more smoke than fire TBH. But like for example the Podiatrist to the Stars at HSS is cash only, so you have a plan that can claw back some of that.
And if you end up in an accident or with a chronic disease you end up being covered.
posted by JPD at 8:58 AM on September 19, 2013 [1 favorite]
Basically you self-insure up to a relatively high level (a few k a year) and then have insurance that starts to pick up above that level. You also usually make sure that spend is pre-tax - which has a high value to you if have a 50%+ marginal tax rate.
I think the concierge medicine thing is lot more smoke than fire TBH. But like for example the Podiatrist to the Stars at HSS is cash only, so you have a plan that can claw back some of that.
And if you end up in an accident or with a chronic disease you end up being covered.
posted by JPD at 8:58 AM on September 19, 2013 [1 favorite]
Rich people are not so dissimilar from you. They get health insurance through jobs and if they are over 65 they are on Medicare like everyone else. It's required. And just like you, many don't like throwing away money (and often that's how they got where they are), so health insurance makes sense from a monetary perspective.
posted by cecic at 9:00 AM on September 19, 2013 [2 favorites]
posted by cecic at 9:00 AM on September 19, 2013 [2 favorites]
In my (not personal) experience, super rich people would still buy insurance, and maybe even more of it. First, if they are a CEO or business owner or something they would get it from their employer just like everyone else. If they are self-employed or just super duper rich, they would likely go out and buy a policy on the open market. The cost might be way high compared to employer coverage, but it would be low enough in a comparative sense as to make little difference to them.
By analogy, my teeny personal example is an umbrella insurance policy that I bought a few years ago to cover catastrophic homeowners or auto loss. We are lucky enough to be in a good financial position, and it just makes sense to spend $1000 or whatever it is to get the extra coverage. I do the same with life insurance. I think that sort of thing is actually one of big hidden benefits of being comfortable financially. With some modest investment you can create a safety net so that when it rains, you get less wet.
posted by AgentRocket at 9:07 AM on September 19, 2013 [1 favorite]
By analogy, my teeny personal example is an umbrella insurance policy that I bought a few years ago to cover catastrophic homeowners or auto loss. We are lucky enough to be in a good financial position, and it just makes sense to spend $1000 or whatever it is to get the extra coverage. I do the same with life insurance. I think that sort of thing is actually one of big hidden benefits of being comfortable financially. With some modest investment you can create a safety net so that when it rains, you get less wet.
posted by AgentRocket at 9:07 AM on September 19, 2013 [1 favorite]
Neil Gaiman writes movies specifically so he has health insurance through the screenwriters' union.
posted by johnofjack at 9:08 AM on September 19, 2013 [4 favorites]
posted by johnofjack at 9:08 AM on September 19, 2013 [4 favorites]
If you were a rich person without health insurance, chances are you would not be a rich person for long.
posted by entropicamericana at 9:14 AM on September 19, 2013 [5 favorites]
posted by entropicamericana at 9:14 AM on September 19, 2013 [5 favorites]
Health insurance is not the same as other insurance. Think of health insurance as health coverage- almost everyone is eventually going to need health care. Not true for most other kinds of insurance.
Rich people generally might pass up something like comprehensive/collision car insurance, or the personal property part of homeowner's insurance. Those things they can afford to replace if they're stolen or damaged. Something they would not pass up is personal liability insurance on their car or their house. These things expose people to much larger liabilities than the cost of the actual item or good. Health insurance is kind of like that.
posted by thewumpusisdead at 10:03 AM on September 19, 2013 [1 favorite]
Rich people generally might pass up something like comprehensive/collision car insurance, or the personal property part of homeowner's insurance. Those things they can afford to replace if they're stolen or damaged. Something they would not pass up is personal liability insurance on their car or their house. These things expose people to much larger liabilities than the cost of the actual item or good. Health insurance is kind of like that.
posted by thewumpusisdead at 10:03 AM on September 19, 2013 [1 favorite]
If you were rich and sick, you might also choose to pay someone else to handle obnoxious insurance claims processing.
posted by steinwald at 10:30 AM on September 19, 2013 [1 favorite]
posted by steinwald at 10:30 AM on September 19, 2013 [1 favorite]
Hospitals and other care providers often discriminate against people without insurance by charging them more. No one likes to pay more for the same service, but many rich people are particularly sensitive about that.
posted by alms at 10:55 AM on September 19, 2013 [3 favorites]
posted by alms at 10:55 AM on September 19, 2013 [3 favorites]
You might be surprised at at the degree to which wealthy folks are actually quite rational and frugal. My grandmother was quite wealthy at the time of her death, and she was literally cutting toilet paper coupons on her deathbed.
The difference was that she could also afford to have part-time medical aides at home instead of being in a medical facility. And yes, she had insurance.
Of course, there are some folks who fall into massive amounts of money who make stupid financial decisions, but not having medical insurance isn't really one of them.
posted by barnone at 10:56 AM on September 19, 2013 [1 favorite]
The difference was that she could also afford to have part-time medical aides at home instead of being in a medical facility. And yes, she had insurance.
Of course, there are some folks who fall into massive amounts of money who make stupid financial decisions, but not having medical insurance isn't really one of them.
posted by barnone at 10:56 AM on September 19, 2013 [1 favorite]
Most very wealthy people that I've met dislike spending money unnecessarily. Like, I've literally heard someone give very specific instructions on which generic soda to buy, while standing at the rail of their oceangoing sailing yacht, because brand-name Coke is "just too expensive." (N.B. this may or may not apply to people who've inherited their fortune, but that's not a situation I'm familiar with.) They also, as a group as far as I've ever noticed, tend to be pretty risk-averse or at least like to take only very calculated, conservative risks.
Health insurance, then, makes sense because the downsides are large and unpredictable. And also because, as others have noted, it would be pretty unusual for someone to get spectacularly rich without some sort of corporate structure behind them with employees and a group healthplan, and the few thousand bucks they might get in return for not participating in the plan is insignificant.
I think the difference arises when someone actually gets sick and the cheap-bastard gloves suddenly come off; someone who is very wealthy has the option of going far above and beyond the options normally dictated by their insurance and, say, fueling up the jet for a second opinion at the Mayo Clinic. Which has long been my general feeling about the extremely wealthy: they're just like you and me, until they're threatened by something and then suddenly you see glimpses of what the exercise of raw, naked economic power looks like.
posted by Kadin2048 at 11:35 AM on September 19, 2013 [2 favorites]
Health insurance, then, makes sense because the downsides are large and unpredictable. And also because, as others have noted, it would be pretty unusual for someone to get spectacularly rich without some sort of corporate structure behind them with employees and a group healthplan, and the few thousand bucks they might get in return for not participating in the plan is insignificant.
I think the difference arises when someone actually gets sick and the cheap-bastard gloves suddenly come off; someone who is very wealthy has the option of going far above and beyond the options normally dictated by their insurance and, say, fueling up the jet for a second opinion at the Mayo Clinic. Which has long been my general feeling about the extremely wealthy: they're just like you and me, until they're threatened by something and then suddenly you see glimpses of what the exercise of raw, naked economic power looks like.
posted by Kadin2048 at 11:35 AM on September 19, 2013 [2 favorites]
I know you specifically pointed out someone who has a lot more than a million, but your title talks about "millionaires". So I wanted to point out that a millionaire is not *that* rich. It's a decent house in a high cost of living city (and they'd still have to work and pay taxes).
Health insurance does more than just pay for health care. You get pre-negotiated discounts through your health insurance (and if you go to a provider just by yourself, you're likely to be turned down or charged some hefty amount more than health insurance). Also, in the US, you can get a high deductible health plan (HDHP) and put a small amount of money (~$3k/year for individuals, and ~$6k/year for families) away in a Health Savings Account (HSA) for tax deductions. An HSA functions a lot like tax deferred IRA, if you don't use it for health care. So there's that.
(I am not a millionaire. But I work and have an HDHP through work. The cost is so low that the tax benefit of the HSA makes it a net gain for me to "pay" for health insurance.)
posted by ethidda at 11:47 AM on September 19, 2013 [2 favorites]
Health insurance does more than just pay for health care. You get pre-negotiated discounts through your health insurance (and if you go to a provider just by yourself, you're likely to be turned down or charged some hefty amount more than health insurance). Also, in the US, you can get a high deductible health plan (HDHP) and put a small amount of money (~$3k/year for individuals, and ~$6k/year for families) away in a Health Savings Account (HSA) for tax deductions. An HSA functions a lot like tax deferred IRA, if you don't use it for health care. So there's that.
(I am not a millionaire. But I work and have an HDHP through work. The cost is so low that the tax benefit of the HSA makes it a net gain for me to "pay" for health insurance.)
posted by ethidda at 11:47 AM on September 19, 2013 [2 favorites]
I can virtually guarantee you that all SMART wealthy people have medical insurance. Think of it this way (numbers are blue skyed, just for example sake) :
1) Rich person buys 12k a year medical insurance, protects say 5 million in assets. 400 to 1 payoff!
2) Middle class person buys 12k a year medical insurance protects 300 thousand in assets 25 to 1 payoff!
Same cost to insure, massively better payoff for worst case scenario. A wealthy person would be out of their mind not to have medical insurance just based on risk/benefit.
As an aside, I knew a trust fund baby w no insurance - he made 300k or so for just waking up in the morning. I talked him into buying medical insurance (couple hundred a month at the time). After a few months he cancelled it because he did not see the value. Month later he is knocked off his mountain bike. 5 hours later 28k emergency room bill. He whined, I told him what I told him before, it could just as easily have consumed his entire trust fund. 28 k lesson was cheap lesson. I assure you he carries insurance now.
posted by jcworth at 12:08 PM on September 19, 2013 [2 favorites]
1) Rich person buys 12k a year medical insurance, protects say 5 million in assets. 400 to 1 payoff!
2) Middle class person buys 12k a year medical insurance protects 300 thousand in assets 25 to 1 payoff!
Same cost to insure, massively better payoff for worst case scenario. A wealthy person would be out of their mind not to have medical insurance just based on risk/benefit.
As an aside, I knew a trust fund baby w no insurance - he made 300k or so for just waking up in the morning. I talked him into buying medical insurance (couple hundred a month at the time). After a few months he cancelled it because he did not see the value. Month later he is knocked off his mountain bike. 5 hours later 28k emergency room bill. He whined, I told him what I told him before, it could just as easily have consumed his entire trust fund. 28 k lesson was cheap lesson. I assure you he carries insurance now.
posted by jcworth at 12:08 PM on September 19, 2013 [2 favorites]
Healthy, young rich people who don't regularly take prescription drugs and do not plan to see specialists may rationally perform a risk assessment and choose to not buy insurance. They effectively self-insure, like a lot of companies do (to take advantage of tax/ERISA benefits), by setting aside money for their own insurance needs.
If the veil around the health industry’s costs and prices goes away (some companies and policymakers are trying to change this) and people can plan their health care costs accordingly, rich people who regularly use medical services may still rationally choose to self-insure instead of purchase insurance (because rich people have the safety net of being rich). At a certain point age-wise (in terms of risk) and health care consumption-wise (in terms of general up keep), it will always be a better deal to purchase insurance.
posted by reparata at 1:02 PM on September 19, 2013 [1 favorite]
If the veil around the health industry’s costs and prices goes away (some companies and policymakers are trying to change this) and people can plan their health care costs accordingly, rich people who regularly use medical services may still rationally choose to self-insure instead of purchase insurance (because rich people have the safety net of being rich). At a certain point age-wise (in terms of risk) and health care consumption-wise (in terms of general up keep), it will always be a better deal to purchase insurance.
posted by reparata at 1:02 PM on September 19, 2013 [1 favorite]
Another reason (kind of alluded to in answers above) that the rich have insurance is that it allows them to take advantage of the highly discounted charges health insurers negotiate with hospitals and other health care providers. An insurance agent friend of mine has told me that the very wealth sometimes have inexpensive high-deductible plans for this reason.
posted by TedW at 6:08 AM on September 20, 2013 [2 favorites]
posted by TedW at 6:08 AM on September 20, 2013 [2 favorites]
Most wealthy people have at least one corporation/LLC/partnership that may do one or all of the following: hold real property, invest, pay household staff, and "employ" the wealthy person as CEO/president and grant that person health insurance. Like most things high net worth individuals do, there is usually a tax benefit as well -- if you structure it correctly, the insurance cost is deductible to the employer and not includable as income to the employee; if the person's trust pays the premiums they may or may not be taxed on it as income; if it's a foreign grantor trust then potentially no one is taxed on it ever (in the US).
Pretty much everything rich people do is through an entity and not in their own name individually. In my dealings with ultra-high-net-worth individuals (both personally and professionally), they all carry health insurance or are resident in a country with universal health care.
posted by melissasaurus at 6:25 AM on September 20, 2013 [1 favorite]
Pretty much everything rich people do is through an entity and not in their own name individually. In my dealings with ultra-high-net-worth individuals (both personally and professionally), they all carry health insurance or are resident in a country with universal health care.
posted by melissasaurus at 6:25 AM on September 20, 2013 [1 favorite]
the rich have insurance is that it allows them to take advantage of the highly discounted charges health insurers negotiate with hospitals and other health care providers.
I'm not convinced that's the case; this WSJ article is just one account of how self-payers are charged less, often much less, than people with insurance.
posted by Admiral Haddock at 9:37 AM on September 20, 2013 [1 favorite]
I'm not convinced that's the case; this WSJ article is just one account of how self-payers are charged less, often much less, than people with insurance.
posted by Admiral Haddock at 9:37 AM on September 20, 2013 [1 favorite]
This thread is closed to new comments.
Younger rich people without a group plan mandate, and some WITH one, will buy very high deductible indemnity personal insurance, which for people without pre existing conditions can be very attractively priced and featured, especially for people who live in places (like NYC) where many leading practices and facilities don't participate in any HMOs or typical group plans.
posted by MattD at 8:52 AM on September 19, 2013 [1 favorite]