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Health Insurance for the Poor—and the Prosperous

Dec 26, 2007

by Tim


“Fourteen hundred dollars?!”

Suzanne’s reply stunned me. I turned my gaze away from the window that allowed us a view into the next-door room where our kids were enjoying a pottery lesson, and looked at her in disbelief. “You’re paying $1,400 a month for health insurance?”

Yes, she nodded. Even though both her employer and her husband’s offer opt-in health insurance plans, the combined monthly cost is $1,400.friendly_nurse_190.jpg

How could this be? That’s four times what we pay, even though demographically, Suzanne’s family is almost a perfect match for us: the adults are close in age—in fact, they’re slightly older—and their two kids are in exactly the same grades as ours.

The answer is simple. Many of us are conditioned to avoid spending anything out of pocket on medical or dental care. Our internal definition of “health insurance” is “never seeing a medical bill.” But you pay an enormous premium to avoid any and all out-of-pocket medical expenses.

Our Blue Cross policy, for example, costs $343 per month. That’s for a family of four, the head of whom is—how shall I put it—edging into AARP territory.

Why so cheap? Because we elected to have a $10,000 deductible, meaning that, in theory, we are obligated to pay out of pocket the first $10,000 of medical bills each year before our insurance kicks in.

That may sound scary, but this choice has some powerful, money-saving, prosperity-building effects.

First, it dramatically reduces our monthly health insurance premium. Sure, in addition to the fixed monthly payment we spend $75 in cash for each teeth cleaning, and a couple of hundred dollars each for checkups. But actual budget tracking over the years shows that, on average, we only spend between $300 and $400 a month out-of-pocket in addition to our insurance premium. So our total “health spend” is still about half that of Suzanne’s family.

Second, even though we have a $10,000 deductible, Blue Cross still covers a solid chunk of many of our bills. I get the distinct impression that the team of six experts who writes these policies actually understands them, while the 9,999,994 people affected thereby remain clueless as to how they work. The armies of clerks who process medical claim forms certainly must have fairly simple criteria for determining what charges are reimbursable, and it seems they consistently decide in our favor. And earlier this year we experienced a minor miracle: Blue Cross actually lowered our premium.

But isn’t it risky to leave yourself open to a whopping bill for, say, emergency medical services? Well, if you’re poor, a lower monthly premium will be more manageable, and at least will protect you against potentially ruinous bills exceeding $10,000. And if you’re prosperous, you can afford to pay cash.

That’s why in my view, the prerequisite for choosing a high deductible is not financial status—it’s good health. So if you and your family are healthy, be grateful, count your blessings, and brush off fear of medical bills. Retool your definition of health insurance and consider a new plan—one that works for the poor and prosperous alike.

Postscript: By no means am I endorsing Blue Cross with these comments; in fact, my wife and I are thinking of changing providers next year— so we’d love to hear which carriers you like and why. Finally, take a look at this chart from Providence comparing rates with deductible amounts. It showed up in the mailbox just as I was preparing this post …providence_premium_chart.jpg

See “Risk of Happiness” and “A Moment of Fulfillment


5 Comments to Health Insurance for the Poor—and the Prosperous

On Dec 26, 2007, Aaron Stroud commented:

Tim, this is a great example of how many Americans could save a bundle on health costs. Next year we’re going to have the option to switch to a higher deductible plan with a health savings account.

It’s going to be exciting to watch our premiums go down as our savings go up.

On Dec 26, 2007, J.D. Roth commented:

One thing I’m looking forward to is increasing our deductibles. Now that my debt is paid off, saving is a priority. And once our savings levels are high enough that we can “self-insure”, we’re going to do it. It’s still about a year out, but I’m looking forward to yet another step toward financial freedom!

On Dec 29, 2007, (by Tim) commented:

Thanks for the reminder about health savings accounts, Aaron. To tell the truth, I haven’t looked into those yet, but I will when our situation changes next year. We’ve been self-insured for the past 5+ years, and it seems likely that we will re-gain the option of employer-provided insurance next year.

So like J.D. for us 2008 looks to be among other things the The Year of Health Insurance!

On Apr 21, 2010, Celinda Claywell commented:

Very interesting post thanks for writing it. I just added your blog to my bookmarks and will be back.

On May 18, 2011, cheap columbia sportswear commented:

I will also like to express that most people who find themselves with no health insurance are typically students, self-employed and those that are laid-off. More than half of the uninsured are under the age of Thirty five. They do not feel they are looking for health insurance since they’re young plus healthy. Their own income is generally spent on housing, food, as well as entertainment. Most people that do represent the working class either complete or part time are not presented insurance through their jobs so they go without because of the rising expense of health insurance in the country. Thanks for the suggestions you share through this website.

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