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For the majority of Americans with no significant health problems, not smoking or drinking excessively, eating well, not obese, and not involved in really dangerous activities (e.g. reckless driving), with savings above $50K, having health insurance is a very bad choice, in terms of ROI.

This actually applies to the self-employed or employees not receiving health insurance from their employer. For these people, not having health insurance is a good decision, from a risk management point of view. Here's why:

  • Insurance companies have to pay salaries to their employees (including expensive actuaries) and have other high overhead costs such as real estate and compliance. These costs are factored in your premium.
  • Put it differently, if an insurer manages to be profitable despite all these costs, it's because they charge you indecent premiums. But it could make sense to get a policy from a company that is not profitable - their losses could be your gain.
  • Insurers do not very smartly manage your money, you can do a much better job at that if you have an analytic mind, by saving / investing money every month for your future health expenditures, rather than paying insurance premiums.
  • It can make sense to have an health insurance policy with an extremely high deductible (> $25K) if the premium is below $50/month.
  • The money you save can be used to grow your business, and gives you an advantage over competitors. This is particularly true when you launch a start-up: in my case it helped me launch my start-up without borrowing money.
  • Not having health insurance is particularly attractive if you focus on prevention rather than curing problems, go as little as possible to the doctor, and use alternate cheaper medicines (or drug purchased in India) whenever possible, and don't need coverage for pregnancy.
  • You might be able to leverage medical advice provided online, at no cost, if you can discriminate between bad and good information. This is called crowd-sourcing diagnosis and treatment.
  • There are many insurance products that are more important than health insurance for the population segment in question, but that don't exist: insurance against unemployment, bankruptcy, divorce, discrimination, lawsuits, tax audits, excessive bureaucracy, burn-out, etc.
  • Data security and privacy issues. What if your medical information is sold to potential employers or government agencies?

With the new Obamacare individual mandate, how can we avoid this inefficient, ill-designed system? What about passing for a very expensive patient that will be rejected by all insurers (you claim that you smoke four packs a day, drink three bottles of brandy a day, do drugs, practice unsafe sex, and have very severe mental problems). In my case, I've joined mathematology, since you can refuse health insurance based on religion principles.

And there's some sort of mild religious belief in my decision: preference to natural solutions, antibiotic avoidance, mistrust in doctors (their incentive is to keep you sick, not to cure you), costs are three times above than what they should be (due to poor analytics and other issues), unecessary costly medical exams, refusal to do business with companies that are very poorly run, gigantic bureaucracy, and frankly even if I wanted to be insured - I don't even know how to find a good doctor or obtain a legit health insurance policy.

What about you (especially if you are self-employed, e.g. a statistical consultant)? What do you think?

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I think a cool simulation of this would be drawn from hedge fund strategies, or for options (actual value+ time value). Personal,health insurance is a hedge against risk in the future.

One of the most respected people in America, Jesus, didn't have health insurance.

True, but once the healers go off the grid, the money changers are back in the temple.

There are dozens of studies comparing health care systems between countries (google it!). USA is the worst between industrial countries in terms of cost/benefit. USA spend more than other countries per capita, with a global performance far below other countries. The only reason to keep the current system is therefore purely political, not logical.

Moreover, your rationale is good if you work with expecations only (yes, you have few chances to have a critical health care issue on a short if you are careful), but is not really robust, or risk averse (how to prevent a major default, event if the probability is low). Since you can only buy one asset (your life), on the individual level, working with expectations only is anything but a right approach.

Agreed. This is the position that data scientists for political campaigns face, in a certain way, since loss is mostly construed as a terminal event. Great reply.

If politicians are driven by private economic interests,then the logical outcome is different than if politicians were to be driven by the greater good.

Since we have evidence for both! we would have to weight them to determine the optimal outcome.
We all die one day, insured or not. The question is: in US, is it better to build yourself a security fund for health emergencies, and when a very expense occur (say $100k per US standard for cancer treatment) you fly to Canada, and pay in cash $30k to get a better treatment?

Another issue is that typically, terminal illnesses burn all savings of most insured Americans. Would you like to have your kids inherit of your last $100k, or your health care provider?

There are of course some different situations where e.g. an emergency, very costly hospital visit after a car accident could save your life without leaving you in a wheelchair for the rest of your life. Such risks can be covered by car insurances or other policies.

The question is more complicated. If health insurance premiums cost you $2,000/month and you only make $1,000/month, you can not be insured. If insurance is $5/month, everybody would be insured but it would not work. So where's the threshold where it makes sense to be insured? That's a very difficult question to answer, and it will be different for even 2 analytic people with exactly the same salary, age, health condition, premium, and risk level, based on the personality of these two individuals: there's a micro-economic / behavioral dimension / utility function to optimize, proper to each individual. One might decide that it is better to save for your kid's college education and forego health insurance, while another person with identical profile might decide the other way around.

Of course the question remains how you have to charge directly to the individual, what will be the coverage extent, and what is the division between public and private. However, on the macroeconomic level, there is a need for universal healthcare coverage, as it reduces the total cost, and improve the productivity. People that does not believe in Obama's plan should study at least the Swiss case, where the introduction of a mandatory heath insurance (relying on private companies) lead to impressive savings, while maintaining higher standards than most of other countries. To keep things simple, I will just refer to this opinion letter:

The healthcare issue is one of the biggest challenge of our modern societies. Just reorganizing the queuing system in a emergency facility can make huge changes in costs and efficiency. INFORMS now has a special group and workshops (e.g. devoted to this question. Tons of papers are published in high-quality scientific journal. IMHO, the question today is not if one need mandatory health insurance, but how to organize it.

At the end of the day, I'd rather be healthy and pay for the sick, than the other way around. This Obamacare is simply a tax on health (similar to a tax on wealth).

A cost benefit analysis will always indicate that buying insurance is a bad investment.  Since insurance companies make money, a return on investment calculation will be negative.  This misses the point.  One should buy insurance to avoid a catastrophic loss.  For a healthy person with healthy eating and behavior habits, buying catastrophic coverage makes sense.  For example, a medical policy with a $10,000 deductible makes sense.  This insurance is relatively inexpensive and protects the customer from an unexpected horrendous illness or accident that might generate hundreds of thousands of dollars in medical expenses.  In most cases, the insured person will never collect a nickel.  However, he or she will sleep much more comfortably each night.

I have an anecdote to share.  I paid $300 a month for my insurance for 2 years.  Two annual doctor office visits for my yearly check-ups still cost me $50 each.  Had some blood work done and that didn't cost me. But last Christmas I burned my hand on a skillet and went to the emergency room.  The insurance paid 30%, which left me with a $1000 bill to pay. Sooo, I figure the money I shelled out every month wasn't worth it and I am putting the dollars into savings instead.  However, I'm not getting any younger and will probably need to buy it again...before I get old and sick.  I like  Peter's logic and will see about the larger deductible. 


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