Should I cancel my health insurance and invest the money instead?
July 26, 2008 5:59 PM Subscribe
Is cancelling my health insurance and investing the money instead a good bet, or a foolhardy risk? I'm young, in good health, and have no chronic health conditions.
posted by anonymous to Work & Money (47 answers total) 1 user marked this as a favorite
And compound interest means that I'd have hundreds of thousands of dollars more at the end of my life. I'm currently paying over $200 a month for an excellent health insurance plan that includes doctor's visits, prescriptions, and low to no deductible for most things. However, I'm living more or less hand-to-mouth. I'm 25 years old and work as a freelance writer, which makes it very difficult to invest any amount of money -- there is simply nothing else in my budget I can cut. If I cancelled the health insurance or downgraded to an emergency-room-only health insurance plan, and invested the money instead, I'd have a few thousand dollars in savings a few years earlier, which would give me a lot more financial stability and flexibility. (Hey, I can buy a car / move to a new city / travel now!) Or, heck, I could just keep saving that money -- the effect of starting a few years early would exponentially increase the longer I left that money invested.
Now: I'm healthy -- I an ex-smoker and run frequently, and have no chronic health complaints, and haven't been to the doctor for an illness in years.
Looking at the problem in terms of risk or reward, I am currently paying $200 a month to guard against a (relatively) low risk of have to pay a lot more in the case I become ill. Now, if I invested the money instead, I'd be taking on that risk, but for a substantial payoff -- a few thousand dollars a year, which could become hundreds of thousands by the end of my lifetime. Essentially, investing my health insurance money guarantees me a large payoff, but I take on a risk of large expense.
Let's posit that I do get any medical help I need, I just pay for it out of pocket, but drift a little more towards poverty. Let's also assume that I'll do this for only two years, by which time I'll have saved a few thousand dollars and will be earning more money. And, remember, I'll have emergency room insurance, so if I'm hit by a car I'll be covered.
So: is this a foolish risk to take, given the payoff, or not? If you were to run this scenario ten thousand times, would you come out ahead, or would the house win? And given that I can only run the scenario once, is it still a good bet? If this were Deal or No Deal, would you take the deal?
(posting anonymously because of all the personal financial information. thanks for the advice, everyone!)