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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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Black swans do occur. Even if driving into a flock of black swans at 70mph is the incident that creates the catastrophic failure that lands you in a critical state requiring $thousands to get you out of the hospital. So planning for rare events is a necessity. 

An analysis depicting the average cost price curve of catastrophic accidents/health criticality's and the cost benefit analysis of premiums/deductible vs total care cost would be instrumental in choosing such black swan insurance. 

This is of course separate from health maintenance / return to productivity costs which must be planned for but, as you note, should not be managed by for profit insurance companies. One should manage such routine health costs oneself. Dental care is a perfect example. Yearly teeth cleaning as a preventative measure should be incurred as a personal expense. While $50 per month might be saved in case of accident or root canal needs.   Five years of saving for black tooth swans would net you $3000 which would go a long way toward catastrophic dental work. Of course $3000 could also buy you a decent vacation in Cabo...

Every single one of us is going to become ill or suffer a lethal injury, and die. The cost of medical care is one risk that can be rationally spread throughout society.

When I was thirty-one years old, I was a passenger in the car of a Regional Vice President of the bank where I worked. The car was a Honda Prelude. We were hit head-on by a Chevy Van. Both cars were travelling at at least 35 MPH. That means a 70 MPH impact.

There was nothing I could have done to protect myself from receiving the injuries that have me largely housebound at the age of 60. 

My granddaughter was stricken with lymphoma at the age of twelve. Her parents could not have afforded her care. She died at the age of 13. She raised her two brothers. It is a loss to the world. She was bright, funny and empathetic. Who should have paid to try to save her life?

Your profile says you are a lawyer. Is there any reason you could not help pay the expenses for your own family?

Ad hominem attacks such as this constitute a logical fallacy. Are you illogical? Are you implying that this is not a risk easily dispersed across a society? My analysis does not rely on my income. I have been affluent. Now I am poor and disabled.

I am not a lawyer. I am a law school graduate. You assumed I make lots of money because you misread my profile, Lots of lawyers make very little money because they work in the public interest. 

The risk would be easily dispersed if the costs for health care were fair. Right now, the system is significantly inefficient and incredibly over-priced. You can imagine that many people don't want such a system imposed on everyone, when there are alternatives (far from perfect) that are much less costly.

The USA needs single payer i.e. the system that the rest of the industrialized world uses, but it will never happen due to the lobbying power of the AMA and insurance companies, and the political distaste for government intrusion.  Those against single payer have a long list of reasons, including care rationing that leads to lack of treatment, and lack of incentive due to price controls in both the human talent pool (good doctors and nurses will do something else) and in the pharmaceutical field (reduce/eliminate development of new drugs).  Nationallized healthcare, socialized medicine, welfare state -- it sparks fear even into the political center, let alone conservatives.

Most of us would value the life of ourselves and our loved ones in terms of everything that we own.  Indeed, medical bills are a significant factor in some bankruptcies.  Once everything is lost, then the government will step in with the safety net.  Since most of us would prefer not to lose everything, insuring against a black swan event does make some sense.  However, insurance providers have to estimate their potential downside risk if they provide coverage to a black swan.  In addition, they have a certain level of overhead and a target profit per subscriber to build in to the premium. Whenever I have looked at this approach, the monthly premium savings diminish rapidly with higher deductible.  I just looked at one plan here in New Mexico, where a $2000 deductible for me is $141 monthly, while a $4000 deductible is $119.  These are plans with 0% coinsurance, which is important.  There are higher deductible plans, but with 20% or 30% coinsurance, which defeats the purpose.  If you have a very high deductible plan with 30% coinsurance, you are still screwed in the event of a major medical event, as 30% of a lot of a big pile of bills is still a big pile of bills.

Finally, one of the biggest problems is that insurance is used to cover services that should be paid out of pocket.  This creates a grossly inefficient structure, where the same financial product covers anything from a $100 office visit to a $1 million organ transplant.   If you have a leaky faucet, you call a plumber and pay out of pocket for the fix; you don't file a claim against your homeowners insurance. 

So, the average uninsured person is left with the dismal choice:  pay a high monthly rate to insure against a downside risk event, or gamble that they will make it to 65 and be covered by Medicare.  Thus, the individual mandate to compel the healthy gamblers to buy in, create larger, healthier pools, and lower premiums for everyone.  Yet, monthly premium savings are likely to be small, given all the factors already discussed:  administrative overhead, profit, and downside risk.  I personally would rather pay higher taxes for a single payer system.  It works pretty well for the rest of the world.  Medicare is going to blow up anyway in a few years, so single payer + higher taxes would take solve that problem as well. 

According to this article, if you pay with a credit card when purchasing groceries, you might have a hard time finding affordable health insurance if you regularly buy cheese burgers, alcohol or cigarettes.

Fascinating. Now, with computers, corporations are fattening themselves on our data. 

There is no doubt that the expected financial return on any form of insurance is negative: the money it can pay out is the money paid in minus costs and profits.

But insurance is not about expected financial return but about utility. In the case of health insurance that utility is getting expensive medical treatment if you need it. In the case of household insurance it is (among other things) having the money to buy a new property or rebuild the old one if it burns down. Most of us rate these things as desirable.

To put it another way,insurance is about minimising (or compensating for) the maximum loss rather than maximising expected financial return.

Vehicle insurance is of course another question:the real utility is to the people you run over. The utility to yourself is that you are then allowed to drive.

It has to be priced right to have any kind of utility. For me (I'm not a millionaire, and I'd rather pay for my kid's education than my health), I estimate this "utility cost" to be $50/month. Above that, it loses it's utility. At $1,000/month, it's definitely money going into a badly managed system and has almost 0 utility. It's not necessarily the fact that insurance companies charges too much, but instead hospitals and doctors do. Sometimes because people believe that going to the doctor all the time and accepting all sorts of medical exams is a right, when (to me at least), at this price it is a luxury.

For instance, I have to purchase a drug for a skin condition, every 4 months or so. Why do I have to drive and spend an hour at a doctor's office each time and pay hundreds of dollars when an equivalent drug is available without prescription in France and costs $20. In this case, the French system (for those uninsured by French health care) is 20x cheaper than in US (for someone insured by the US health care system). It's like comparing eating noodles (basic human need) with caviar (luxury).

regardless of whether it makes sense as an individual, what is the total effect? If you are uninsured, get in a car accident and have a life threatening emergency, is it acceptable to refuse to treat you since you have no insurance and no means of guaranteeing you will pay after they treat you? 

If not, then we are all paying for your lack of health insurance anyway. (unpaid ER bills= higher prices for everyone who is paying)  Why should I be penalized for your individual risk decision?

If you think it is okay to refuse treatment to people who can't afford it, even in life threatening situations, I think you will not find sufficient company in our current society to stomach that. 

What needs to be fixed is the cost, it's a much higher priority than having people insured or not. Your car accident example should cost $5K, not $100K. And in my case, the ER visit would be covered by my car policy anyway.

When you call an ambulance, even the firemen arrive. Hospital stays cost tons of money, more expensive than a suite in a prestigious hotel. What is the incremental lift (in terms of saved  lives) over a system that is 20 times less expensive? Probably zero, possibly even negative.


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