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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.

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!)
posted by anonymous to Work & Money (47 answers total) 1 user marked this as a favorite
 
A good friend of mine -- healthy, athletic guy, no chronic conditions -- was playing a friendly game of hockey one night, a sport he'd safely engaged in since he was a kid. That night, he took a spill -- as he had countless times before -- but this time, he slammed into the crossbar at a weird angle.

The way in which his neck broke generally means instant death for most people; of those who survive, the majority become quadriplegics. A tiny percentage of people who break their necks the same way he did go on to recover fully.

The medical bills associated with that recovery, however, hit seven figures. His emergency-only insurance took care of a small percentage of that. He negotiated the remaining bill with the hospital and the doctors down into the low six figures; fifteen years later, to my knowledge, he's still paying it off.

Now tell me again about this bet you want to take?
posted by scody at 6:21 PM on July 26, 2008 [8 favorites]


Absolutely no.

A fall could break a bone, and leave you with tens of thousands of dollars in medical bills. You could have any number of accidents.

As far as disease, every person who was diagnosed with a serious illness felt fine until they started feeling bad. Some people are diagnosed with serious illnesses before they even have symptoms. Plus you should be getting regular checkups and blood work. That is all very expensive. A few thousand dollars a year will go to regular checkups alone, if you want to take care of yourself.

Canceling insurance to "save" a couple grand a year is the dumbest thing you could ever do.

One story for anyone who has not had a checkup in a while: A friend of mine was diagnosed with leukemia when he had felt absolutely healthy. He was very fit, a mountain climber, who exercised regularly. He bloodwork was within normal range, but because he had regular checkups, they saw a difference from previous years. They caught it quick enough that he got treatment and survived it. If that bloodwork had not had a baseline to compare it to, they would not have suspected anything until he felt sick, and then it would have been unlikely he would have survived it.
posted by Fuzzy Skinner at 6:23 PM on July 26, 2008 [1 favorite]


About 15 years ago, when I was in HS (young, otherwise healthy), I was hospitalized for a very random, very sudden neurological issue. I was in the hospital for 13 days, sadly about a month or two after my father had lost his job and the family health insurance.

15 years ago, a 13 day stay at Mass General including assorted testing cost a little over 30k. That was the bill my parents got when I was released, and not including neurologist follow ups, etc.

I know it basically is everything insurers want you to think, but I never want to be without health insurance by choice. There are plenty of people who are so young/healthy/fit/whatever, and are suddenly stricken with neurological, cardiac and other issues of disease. You hear it all the time. Not to mention, just random acts of chance, like you're hit by an uninsured or hit-and-run driver, or you take a nasty fall and break something.

I don't even know what that sort of hospital stay would translate in 2008 dollars, but I am sure it wouldn't drift many people towards poverty so much as slam their lives into bankruptcy.
posted by jerseygirl at 6:28 PM on July 26, 2008 [1 favorite]


I'll have emergency room insurance, so if I'm hit by a car I'll be covered.

Your visit to the ER will be covered, but not the prescriptions, or the crutches, or the physical therapy, or any other follow-up care you'll need.

I'm pretty low-risk when it comes to health insurance (young, eats well, exercises, no serious existing conditions or inherited predispositions) and I sure as hell kept my health insurance back when I was broke.
posted by xbonesgt at 6:29 PM on July 26, 2008


I an ex-smoker and run frequently

say goodbye to your knees in 5-10 years.

fwiw as a 40yo I'm paying $200 to BlueShield every month for PPO ($170) and some dental coverage ($30), with a $1700 annual deductible & out-of-pocket cap. Yes, the plan means I bear the first $1700 of expenses outside of annual physicals but no higher; it's weird and I'm not entirely sure it makes sense but we'll see how it goes.
posted by yort at 6:33 PM on July 26, 2008


I have friends who have been hit by cars while they were on bikes (broke a foot, lost 6 weeks of work, ran up $20,000 in med bills for ER + ambulance + physical therapy + therapy for PTSD) or hit by cars while they were in a bus (permanent back injury + bills for PT). These two cases alone would suggest *against* giving up health insurance.

Also, you don't have any chronic health conditions *now*, but that's not to say you never will. I know plenty of people who, in their twenties, have developed lyme disease or (sometimes AND) lupus. The moment you do get sick with anything that would require so much as a follow-up visit, the likelihood that you would be able to get health insurance *afterwards* is pretty much nill. If you keep your insurance now, you have a much better chance of keeping it later, but if you let it lapse... then you run the risk of being denied for anything that might be deemed a "pre-existing condition."

If nothing else, keep it to karmically balance those of us who are in our twenties, have chronic conditions, and would KILL to have health insurance as good as yours!
posted by grapefruitmoon at 6:39 PM on July 26, 2008


As someone who works with health insurance at a large hospital, I would absolutely not endorse dropping your coverage. Emergency room coverage is just that - emergency room. What about inpatient admissions stemming from a serious-enough accident? Rx? Durable medical equipment? Follow up visits to the doctor? Follow up surgeries? And even without accidents - just because your health is good now in no way guarantees it always will be. Before you are able to save up enough money to cover treatment for an illness, if something pops up you will be in a world of financial hurt. Especially since in some instances, medical providers wil be asking for a deposit or payment up-front.

If you want to save some money, you may consider a plan with a higher deductible, as that usually drops the price of the premium. However, my rule of thumb is to not take on a deductible that, if you incurred medical bills, would leave you in serious financial straits. For example, can you afford $500 out of pocket for medical costs? Then look at a plan with a $500 deductible.
posted by DrGirlfriend at 6:39 PM on July 26, 2008 [1 favorite]


$200/month for excellent insurance is nothing to sneeze at. (I'm paying almost $500/month because my spouse's company only covers his premiums.) And just because you take good care of yourself doesn't mean you're immune to the misfortunes of daily life. There was a New York magazine article about the young and uninsured--perhaps seeing similar situations will help you decide if it's worth the risk.
posted by calistasm at 6:42 PM on July 26, 2008


it's not a good bet or a foolhardy risk; it's utter stupidity.
posted by gnutron at 6:48 PM on July 26, 2008


Two years ago, I got laid off and opted not to pay for COBRA. I ended up being out of work for 5 months, but was lucky, and had no health incidents. Two year later, I've just been diagnosed with thyroid cancer (highly survivable with proper treatment). Thank the gods, I have excellent health insurance at my new job- I won't pay anything out of pocket other than my copay for doctors visits. Being without health insurance is always a roll of the dice. I came a little too close for comfort to completely bankrupting myself and/or endangering my health. Because like the other posters warn... you never know when you might get fucking blindsided.
posted by kimdog at 6:56 PM on July 26, 2008


Holy god, no. You don't screw with health coverage. Even if you aren't hit by a truck/struck down with cancer/break a leg, there are numerous small medical things that may hit, that you're better off just being able to bill and forget. Especially those nagging things like a rash, which may require a couple of different doctors visits before they can tell you what it is.

Honestly, as a person from a country with Medicare, I can't understand why anyone would give up health coverage. That would be like deciding to drink river water because 'hey, I'm healthy and it's cheaper than paying hydro bills!'
posted by Phalene at 6:59 PM on July 26, 2008


Arguing from personal anecdotes is pretty stupid, just keep that in mind in reviewing the responses thus far. I don't think anybody here is really qualified to analyze the statistical expected outcome of any decision you make. Personally if I were in your shoes and did not engage in any sort of dangerous activities (contact sports, cycling) I would probably cut it to er only.
posted by norabarnacl3 at 7:03 PM on July 26, 2008


Just turn up your deductibles to the max and lower your premium. It's a great compromise.
posted by rhizome at 7:14 PM on July 26, 2008 [1 favorite]


Arguing from personal anecdotes is pretty stupid

Arguing from personal anecdotes is the best possible argument: "Here's what happened to this person. Is it worth the risk?"

Look, I'm Canadian. I don't have to worry about this kind of thing. I am a notoriously risk-averse guy who engages in no dangerous behaviours. I don't ski. I don't cycle. I don't even drive.

A couple of years ago I was walking down the sidewalk, slipped, and broke my leg in three places. I had to have major surgery, implanted hardware and months of physio as a follow-up. Walking down the sidewalk! Statistically, safer than cooking dinner or taking a bath, and if our places had been switched, you'd be on the hook for tens or hundreds of thousands of dollars.

It doesn't matter how careful you are. You cannot predict the likelihood of a life-altering medical event. Pay the goddamn insurance.
posted by ten pounds of inedita at 7:17 PM on July 26, 2008 [1 favorite]


Oh, and that New York magazine brings up a good point: charges for the unisured are higher than for the insured, because the insurance companies work out negotiated rates with health care providers. So say you break your leg and go to the ER. All the associated costs would have been previously negotiated with your insurer (for a total of, say, $1500), of which you would have to pay some sort of portion (in the form of a copay or deductible).

However, if you are without insurance, the hospital will charge you full price, which could be... who knows? For that broken leg, all the non-negotiated charges cuold easily turn out to be $3000 or $5000 or whatever, which you'd be on the hook for in total.

And it's the same thing with non-ER services. Blood tests can run hundreds of dollars or more; doctor's office procedures (scans, X-rays, etc.) can be thousands -- even at the negotiated rate. A single overnight stay in the hospital will automatically put you back five figures. This has nothing to do with "arguing from personal anecdote" and everything to do with the factual costs of medical care in this day and age. There's a reason that -- housing crisis aside -- astronomical medical bills are one of the leading causes of personal bankruptcy. It's not just the elderly or the chronically ill who rack up those kinds of bills -- it happens to young, healthy people every single day.
posted by scody at 7:18 PM on July 26, 2008


It is great that you are thinking about your financial future, but as you get older, you will never miss the money you could 'save' by not having health insurance. Cut back on other things or get a second job if you truly want to save more or invest.

However, you will curse EVERY DAY that you do not have health insurance if you are ever without it and NEED it. Medical costs are one of the major reasons for personal bankruptcy today. Even with medical insurance, people can rack up huge amounts of debt for catastrophic cases. And unfortunately, without insurance, you won't get the quality of care you might get otherwise.

Health insurance is like insurance on your car or home. Your life is more important than either of those, so take care of yourself.
posted by inquisitrix at 7:20 PM on July 26, 2008


Look at it as $50 a week well spent. Think about finding a way to increase your income $200 a month and invest that. Just pretend as if the $200 for the health insurance isn't even there, make it unavailable for anything else and feel secure in the protection.
posted by Gerard Sorme at 7:24 PM on July 26, 2008


During a contracting stint, I waited a few months before getting my own health insurance... and developed appendicitis. $15,000 out of pocket.

Not a life-destroying debt, but I got lucky (and I didn't smoke, and ran every day). Any of a hundred other ailments (or accidents) could have happened just as easily.

Only gamble with risks you can afford to lose.
posted by IAmBroom at 7:27 PM on July 26, 2008


Maybe there is a plan that is less than that, but more than just E.R.? I have such a plan and I do invest the money I save and also spend more on healthier food. When I contracted food poisoning covered much of my E.R. visit (I paid 400) and my followup care was about $20 a visit. Some prescriptions are pretty high though, but that was a big incentive for me to stop taking things that I didn't really need like Claritin (I use a neti pot now). When I needed antibiotics they were cheap, so I don't really mind.
posted by melissam at 7:32 PM on July 26, 2008


Given the rising cost of health care, the level of financial risk you're betting against will itself be rising. A $30,000 hospital stay today, may in five or ten years cost $100,000.

In other words, your $200 monthly investment becomes diluted with time.

On a long enough time line the survival rate for everyone becomes zero. You may be young and health today, but I assure you, barring sudden death, you will one day be old and unhealthy... you will at some point want health coverage, thus there is a cap on the amount you can save before health problems cause you re-evaluate your gamble.

The risk is two-fold too: You risk not only a massive health care bill, but also may limit your continuing health care and thus impact your long term earnings potential. If you blow your savings on a six-figure hospital bill, loose your job because you're out of work for weeks or months, and then find pricey, but needed physical therapy beyond your reach, you could find yourself in the poor house. It happens to our fellow Americans every day.

Factor in financial instability, the falling value of the dollar, and suddenly $200 a month for health care doesn't seem like a bad deal at all.

Further, imagine a scenario where your could re-sell your health insurance. There are many people out there who would gladly pay $200 or more for quality health insurance. At the same time there are many people who would gladly forgo such an "investment" in exchange for health care.

Lastly, unless you are the smartest person in the world, and this is a genuinely novel idea, it should inform you that most people would consider this an insane roll of the dice where the financial payoff does not outweigh the risk.
posted by wfrgms at 7:33 PM on July 26, 2008 [1 favorite]


If you do have a life threatening condition where it's only money between you and death, who in your family will feel compelled to save you? Your mother, your brother, do they know the burden you are putting on them? That's not really fair.
posted by StickyCarpet at 7:38 PM on July 26, 2008


Arguing from personal anecdotes is pretty stupid

yeah, that's what the freakonomics people would say, no doubt.

A dollar saved today will be $4 in the bank in 30 years, given 5% compounding interest.

'course, what cost a quarter in 1978 now costs (almost) a dollar, so in real terms every dollar you save now for retirement will probably be worth a dollar when you take it out. Exciting, no?
posted by yort at 7:53 PM on July 26, 2008 [1 favorite]


No.

Just because you are healthy and have no chronic conditions today doesn't mean you won't become ill or develop a chronic condition tomorrow.

I have a stupid personal anecdote.

I was perfectly healthy until around my 22nd birthday. That's when the shit hit the fan and now at 24, I'm up to 3 chronic diseases, 2 more serious than the other. It's certainly not unusual for these diseases to appear in someone in their twenties, and there are many other diseases out there like that.

When I asked my doctors about the causes for the different diseases, here's what they said:

Doctor 1: "We don't really know exactly."
Doctor 2: "It's mostly genetic."
Doctor 3: "It just happens."
Doctor 4: "Bad luck."

Will you end up developing a chronic disease or being through some sort of trauma? Probably not. But are you feeling lucky?

Good thing I had insurance. The $15,000 hospital bill was, by my accounts, expensive. This year so far, if I had to pay out of pocket for my prescriptions, I would be $3200 poorer. It's only July.

If you were to get sick and obtain insurance after you the fact, there could potentially be problems with pre-existing conditions. The Certificates of Group Health Plan Coverage I receive from my previous insurance companies tell me so.

If you get rid of your insurance and end up saving a lot of money, it will look like a good decision. If you get rid of your insurance and become seriously ill, well then, I guess you're one of us unlucky ones.
posted by mathlete at 8:01 PM on July 26, 2008 [1 favorite]


Only gamble with risks you can afford to lose.

Repeated for emphasis, because IAmBroom is spot-on.

The downside is being colorfully described in this thread, and I could add my own story. The upside you have described yourself.
posted by adamrice at 8:23 PM on July 26, 2008


find a middle-ground -- can you find a lower cost insurance plan with a high deductable?
posted by rmd1023 at 8:44 PM on July 26, 2008


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.

I don't think this is correct. You could "save" $2,400 a year but it would be very hard to invest that and make "a few thousand dollars" a year from that. You're also not "guaranteed" a large payoff - no investment is risk-proof. Even if you invested in a safer investment such as a CD or high yield savings account, you wouldn't reap the kind of payoff that you're expecting. You're essentially taking on two risks. One being that you won't need the insurance and the other that you'll actually make money on your investment.

I would not take the deal. Never in a million years. I would rather not travel, not move, not buy a car than assume the risk that something might happen and I wouldn't be able to do all those things and then some, cause I'd be paying for it for years. Those are all "extras" - things you don't need, but I don't view healthcare as on equal par with those items. It is not an "extra" that you don't need. Do not do this.
posted by ml98tu at 9:04 PM on July 26, 2008


Jim Cramer's latest book, Stay Mad for Life, is recommended for you. It's a great read for young people who want to get started investing and retire rich.

His #1 rule - #1, mind you, it's at the top of the list, before "have somewhere to live" - is that you should pay for health insurance.

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.

This will be fine if you remain healthy. If you need to be in the E/R, you will pay $10000. If you need a simple operation you will pay $50000. If you need open heart surgery or something goes wrong inside your belly or brain you will pay $100000. If instead you actually become really sick, $250000 can disappear in a 6 week hospital stay without any difficulty at all. You will not pay for these expenses out of pocket.

Failure to pay for these expenses means you will be transferred to a hospital for the indigent, where you will be worked on by doctors in training if you are lucky, or poorly skilled foreign medical grads if you are not. You will be likely to die. This means you will not get rich.

More insidiuously, scraping by on crummy pay-as-you-go healthcare means that if you get sick, it is more likely to turn into a career-ender. Just as one example, people with multiple sclerosis who can afford the $24,000 a year for Avonex shots get 30% fewer relapses. They can keep their jobs. But they need prescription coverage or they can't afford that. People with migraines - I can cure 'em with some medications and you go back to work with a clear mind unimpaired by brain-fogging medications. That generally takes 5-10 visits with me and some state-of-the-art medications, not the cheap subsititutes that were in wide use in 1950.

I don't routinely see uninsured people. I don't have to, I can fill my practice up with the insured. I don't even routinely see people with Medicaid - it means turning away a patient whose health plan will pay me triple, and who has demonstrated they care about maintaining their health - and if they keep on cutting Medicare I will stop participating in that plan too, because it doesn't make financial sense to lose money on a patient.

That's the case for having health insurance. Look into lower-cost plans like Tonik.
posted by ikkyu2 at 9:17 PM on July 26, 2008


Yes. Switch to catastrophic coverage -- just make sure it covers what one would need after the $5k or so deductible.
posted by mmdei at 10:03 PM on July 26, 2008


Medical bills for the uninsured and underinsured are the number one cause of bankruptcy in America. If I were looking to have a lot of money down the road, I don't think that willingly putting myself into the highest risk category for bankruptcy would be the best way to go about it.
posted by Pater Aletheias at 10:22 PM on July 26, 2008


It looks like the typical health insurance company spends about 80% of revenue on actual care. They are able to negotiate much, much, much better rates than an individual. Even if that weren't the case, your expected profit would be the difference--i.e., 20% of your fees ($40/month or $480/year).

You should think of this money as an investment. It's like an option on your future health. So you could think of it as part of your portfolio, and analyze it in the same way you would any investment. I don't know what the standard deviation of health spending per person is in your demographic, but I would bet you a month's insurance that investing $0 in health insurance and shifting that money to stocks (or whatever) would move you further away from your efficient frontier, and would lower the expected value of your personal alpha.
posted by jewzilla at 10:47 PM on July 26, 2008 [2 favorites]


Look into HSA (Health Savings Account) coverage. You may be able to find coverage that protects you in case of serious illness while allowing you to invest the money you would otherwise be spending on a high, unused monthly premium. After my Kaiser rates went up when I hit 40 my husband and I decided to give this type of coverage a try, and we're saving a couple thousand dollars a year on our health insurance now. There have been no health crises since we made the change, so I can't speak to how it plays out when used--but theoretically, we ought to have some flat fees in the mid $1000s that we are responsible for before full coverage kicks in. As healthy people, it's a risk we're willing to take, and a similar plan might suit you.
posted by Scram at 10:47 PM on July 26, 2008


(my point about expected savings is only true if you execute this plan over your whole lifetime, btw--in the short run, it's less clear-cut, but the second paragraph still applies).
posted by jewzilla at 10:53 PM on July 26, 2008


15 years ago, a 13 day stay at Mass General including assorted testing cost a little over 30k.... I don't even know what that sort of hospital stay would translate in 2008 dollars,...

For anyone reading this later on, a 4 day stay at MGH related to a broken bone and subsequent surgery ran $12K. Without a single room, even.
posted by whatzit at 1:42 AM on July 27, 2008


Just turn up your deductibles to the max and lower your premium. It's a great compromise.

Exactly. What you want is catastrophic coverage. That way you won't be left destitute if something horrible happens, but you won't be paying so much for services you never use. You just have to just pay for anything below your deductible, which is almost certainly much, much less than $200 a month. Heck, I doubt I spend over $200 in a year on medical anything (other than, um, insurance), and I'm older than you.
posted by Violet Hour at 2:44 AM on July 27, 2008


The problem with the anecdotes above is that they are about people who had no coverage or the wrong coverage. I'm certain that you, age 25 and healthy, can get the right coverage for less than $200 per month. You should get insurance that doesn't cover regular doctor visits or other things that you could afford otherwise. You should have a high deductible. And you should make sure that after your deducible, your expenses are covered. Because something could happen. See the anecdotes above.
posted by Dec One at 4:40 AM on July 27, 2008


thanks, whatzit.
posted by jerseygirl at 5:07 AM on July 27, 2008


First, ignore the caveat regarding your knees and running. I started running in my twenties and twenty years later, after completing two marathons, my knees are perfectly fine. (I stretch constantly and workout with the gym's leg machines to keep them that way.)

Also, in my twenties, I opted out of health insurance. Any health insurance. And twenty years down the road, I figure that my wife and I have saved $250K, which is now accruing interest in various investments.

This strategy is risky. To keep the risk at bay, I fork out money for bloodwork and tests from my own pocket. And I avoid all sports that even hint of danger. No hockey, no bike riding even. I'm extremely careful when walking on ice.

For you, I'd recommend a catastrophic policy, with a low payment. Get annual checks, and avoid dangerous sports. Above all, put the money you save into a low-risk mutual bond fund, so you can withdraw it if you need it for medical expenses.

For healthy, low-risk people, insurance that goes beyond catastrophic is a gross waste of money that could be invested otherwise.
posted by Gordion Knott at 5:28 AM on July 27, 2008


For those still reading, here's a horrifying anecdote against the tide.

Our family has had the same debate with my 25 year old nephew since he turned 21 and began working. This year he had a terrible accident, was in intensive care for 2 days, hospital for a full week and at the end of it all? A thick itemized bill arrived from the hospital with a final balance owed of ... $0. The hospital wrote off the entire debt and wished him well.

His take -- "I told you: health insurance is for chumps."

My advice: raise the deductible, keep the insurance. This kid got very, very lucky and had the wrong lesson reinforced.
posted by mozhet at 5:58 AM on July 27, 2008


Three months ago a car smacked into my motorcycle and snapped my leg. I've missed 3 months of work (and am thus out that income), plus have a pretty hefty hospital bill. I'm in China, so this isn't as expensive as in the States, but still: $6,000 is what I've lost on this. That's what I lost on this for not having insurance. That's 30 months of investing your $200. 2.5 years, and that's only because I'm in a developing country. If the same had happened to you you'd be in for a lot more than that.

Keep your insurance.
posted by saysthis at 6:26 AM on July 27, 2008


Worst case scenario: You have a health care problem that runs into hundreds of thousands. You would lose all your savings, become indigent, declare bankruptcy, and receive whatever/wherever care the Medicaid system chooses. Many health care providers will be unavailable to you because they don't accept Medicaid. Family & friends would have to help with prescriptions, food, housing and personal care.

Best case scenario: 2400/year savings. The math here is pretty easy.

You have a plan that includes "doctor's visits, prescriptions, and low to no deductible for most things" for 2400/year? Many would love to know where/how you got this.

It's smart that you're thinking about investment for retirement. Invest in your education; it will pay off. Invest in a network of friends and colleagues. If you want to invest money towards retirement, get a 2nd job. Seriously, there are a lot of jobs that can be fun, and not only will you make more, you spend less on entertainment while you're working.
posted by theora55 at 7:46 AM on July 27, 2008


Also, in my twenties, I opted out of health insurance. Any health insurance. And twenty years down the road, I figure that my wife and I have saved $250K, which is now accruing interest in various investments.

$250K saved over 20 years works out to $12,500 a year, or just over $1000/month. I guess I'm missing something, because though I certainly know first-hand how expensive it can be to pay for insurance out of pocket these days, I'm not seeing how opting out of health insurance in 1988 yields a quarter of a million in sheer principle (because the statement implies that any interest earned has been on top of the $250K). Premiums were certainly nothing like $1000/mo. in the '80s, and assuming you're a healthy guy in your 40s without preexisting conditions, you most likely wouldn't have such a costly premium now, anyway.

posted by scody at 10:05 AM on July 27, 2008


Every financial guidebook for people around our age says to make health insurance your first priority. That's step 1 in pretty much everything I've read, precisely because of the game-ending consequences you've read about above: denial of coverage for preexisting conditions down the road, medical bills that read "Say goodbye to your investments for the foreseeable future while you pay this off."

If you're really crunched, take on more freelance work, or try to find a part-time position somewhere (even, say, in retail) to offset things. Better yet, get a part-time retail position with benefits, like at Trader Joe's or Starbucks. But one way or another, get coverage.
posted by limeonaire at 10:07 AM on July 27, 2008


It´s not just the money.

You are thinking that upside=savings, downside=debt or bankruptcy. A clear financial risk that you can calculate.

If you end up in need of expensive medical care, you can easily find yourself in a situation where you can´t get it because you have no insurance and don´t have the funds on hand to pay. Your health may end up being much worse because of this.

Your current health insurance sounds like a good deal, which makes me wonder if there could be some things making it a bad deal that you haven´t mentioned. Is there a cap on what it will pay per year/day/hospitalization/procedure? I´ve seen some plans with a cap of $200 per day for hospital stays and $1000 on nonemergency surgery -- these would be laughably low amounts to pay for these things, and a person on one of these plans would end up owing huge amounts on top of this. If you saw something like this on your plan and decided to risk paying $200 a day if you are hospitalized, recognize that you have really cruddy insurance and that you would probably end up paying far far more than their payment limits.

However, if you are sufficiently poor and can stay that way, and live in the right place, you can qualify for very low cost medical care. Another option would be to enlist in the military and qualify to use the VA medical system. Plan on moving to an area with a good VA hospital after you get out.
posted by yohko at 10:34 AM on July 27, 2008


I second getting a Health Savings Account. They were basically designed for exactly what you're talking about. I haven't needed to go to the doctor in years, and have a nice chunk of change (that my employer matched) socked away making me money.

They're win-win: for a couple dozen dollars a month, you get to save money (tax free!) and have protection against debilitatingly-high medical bills.
posted by J-Train at 11:59 AM on July 27, 2008


There are so many things that can go wrong with the human body and mind at any age. Life changing occurances that are the product of just being dealt a bad hand. Especially neurological brain disorders that are still prevailiant in your age group.

From what I gather, your spending $200 dollars a month on insurance and would like to invest the money instead. I would find a way to earn an extra $200 dollars per month and invest that. I know, easier said than done while free-lancing.
posted by captainsohler at 12:25 PM on July 27, 2008


It's a crappy way to save money, up there with playing the lottery.

You probably don't need another story in this thread, but in case you do...

Years ago I was a healthy 26year old male freelancer who thought insurance was for people who couldn't manage money. I put maybe $150 a month into an account for medical expenses rather than pay for insurance.

Two years later I had about $4000 in the account. I also had a kidney stone. Having it removed plus pre and post care cost me close to $20,000. The only way I could pay was to put the balance on my credit cards ("luckily" I had the credit available.). IT ws either that or live with a jagged rock in my kidney that made me piss blood.

It coincided with a downturn in the economy. My credit card payments ended up being well over $150 a month, and since work was slow I occasionally missed them. Which raised my rates and made the whole thing cost a whole hell of a lot more than it would have if I had just bought the damn insurance to begin with. Took years to pay off. The only up side was that my taxes were much smaller that year because you get to deduct medical expenses. Not worth the trade off by a long shot.

The whole point is that you really don't know what's going to happen. That's why they call it insurance.
posted by Ookseer at 8:04 PM on July 27, 2008


if you are sufficiently poor and can stay that way, and live in the right place, you can qualify for very low cost medical care

my mom has to use this 2nd-class system and it's . . . absolutely horrible. Don't go there.
posted by yort at 10:00 AM on July 28, 2008


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