A Different Perspective on Health Insurance
By Peter L DeHaan
happened again. It shouldn’t surprise me but it
does. In fact, it has been said so often that most
people believe it to be true and accept it as fact. What
am I talking about? Once again, a politician has
stood up and impassionedly, emphatically, and convincingly asserted
that we, as citizens of the United States of America, have a right
to health care.
a minute, we have a right to health care? Is
it in the Constitution? Is it listed in the Bill of
Rights? No, health care is not a right, but
asserting that it is serves as an effective rallying cry for those who
feel under-insured. People who do not enjoy this
“right” imagine themselves as victims and in need of a champion to
rescue them from their implied substandard existence. Who
will rescue them? The very same politician who
pointed out this grave injustice in the first place! Political
rhetoric aside, there are several other misunderstandings about health
insurance, as well.
to Webster’s, insurance is the “coverage by contract whereby one
party undertakes to indemnify or guarantee against loss by a specified
contingency or peril.” The key words here are
“contingency or peril.” Let’s look at some
have insurance on my house that will replace it if it is destroyed or
suffers major damage. Without insurance, losing a
home would be a financially devastating hardship. My
homeowner’s policy doesn’t cover repairs or maintenance; those are
things I can afford to pay myself.
cars are insured as well. When they are new, I have
full coverage in the event of a major accident. The
thought of needing to unexpectedly shell out tens of thousands of
dollars to replace a car is sufficient justification to pay for
premiums with full coverage.
people had the same expectations of their car insurance as they do for
their medical insurance, here is how it might work. First,
there would be a five dollar co-pay for gasoline. It
wouldn’t matter if the tank were half-full or empty; the cost of a
fill up would be two dollars. This would provide
little incentive to buy fuel-efficient vehicles – we would merely
want cars with bigger gas tanks! Oil changes would
probably not be covered, but that’s okay. Just
skip the oil changes and when the engine seizes up, there’s nothing
to worry about, because engine replacement is covered! If
you hadn’t reached your deductible, you might need to pay twenty
percent of the “reasonable and expected” charges for an engine
rebuild, but that’s all. Then there are tires.
Your policy would pay to have tires replaced every two years.
It wouldn’t matter if you needed tires or not. So
even though there is still usable tread on them, you have them
replaced – insurance will pay for them. Of
course, if one of these new tires has a blow out before the two years
are up, then you’re out of luck – and you get mad at your
insurance company. What about the cost to keep that
old beloved car running? Not a problem, insurance
covers it. Never mind that the parts are no longer
being manufactured, hard to find, and expensive. Insurance
will pick up the tab. The downsides to this
incredulous scenario are that there will be lots of paperwork and you
can only go to mechanics that are “part of the system.”
you say, “Cars are not people!” You’re right.
They’re not. So, let’s talk life insurance.
I want my family taken care of in the event I die unexpectedly.
This sounds simple, but there is a decision to be made as to
just how well I want them to be provided for. The
first reaction is that my family should be totally and completely
taken care of – forever. Let’s see, that will
be a policy for a gazillion dollars and the monthly payment will
be…slightly more than my take-home pay. Okay
then, how about if they are partially taken care of but still need to
work. Now the monthly insurance payment drops but
is still too high. Okay, how much insurance can I
get for fifty bucks a month? I’ll take it!
insuring our lives is reduced to an economic decision, a cost-benefit
calculation. If the tendency is to focus on the
expense of life insurance, rather then the benefit, why not do the
same for medical insurance?
when companies paid all their employees’ health insurance premiums,
we, the insured, didn’t care about – or even consider – the cost
of that benefit. But as premiums skyrocketed,
companies began shifting some of that cost to employees. This
should have driven home the financial cost of company-provided health
insurance, but for far too many employees it didn’t. Over
the years, I’ve had employees come to me with this common lament
about their health insurance: “I didn’t even get back as much as I
insurance isn’t like the lottery. The expectation
of receiving more than you paid is simply ludicrous. Yet,
for some reason, many people view their health insurance with such a
mindset. I submit they don’t think that way about
their auto or home insurance, and certainly not their life insurance.
Personally, each time that I write a check from the premium for
my car, house, or life insurance, I am thankful that I didn’t need
to use it!
many workers don’t realize is that insurance companies are in the
business to make money. Even non-profit insurance
companies have to have this attitude. How do they
make money? Quite simply, their income (that is,
insurance premiums) needs to exceed their expenses (that is, claim
payouts and overhead). That means, on average, no
one is going to “get back as much as they put in.” If
they do, the insurance company has lost money on them. If
the insurance company losses money on too many people, or for too
long, they either go out of business or need to dramatically raise
we recognize the economic aspects of insurance (the cost-benefit
perspective), are cognizant of the business model (to make money), and
jettison wrong expectations (getting more than we put in), we can move
forward with an attitude that health insurance should cover the
“big” things and we should take care of the rest. Therefore,
I want a policy that will cover a major surgery, a catastrophic
illness, and prolonged treatments. I want to, and
should be able to, cover the rest. But how can I do
the government has a solution! It starts with a
high-deductible health plan. High-deductible means
much lower premiums. This addresses concerns of
catastrophic illnesses and bills that would result in financial ruin.
In fact, my own health plan has a deductible of $5,250.
That means I am on my own to cover most, if not all, of my
family’s medical expenses. This brings up the
second aspect, a health savings account (HSA). An
HSA lets me set aside money, tax-free, for medical expenses. This
money can generate a return, which is also tax-free, and when I use
the money for medical expenses, it is again tax-free.
the high-deductible medical insurance combined with a health savings
account, I have taken control of my medical costs and saved money.
I make decisions for how and when money will be spent on
medical procedures, just like every other expense I consider – on
the cost-benefit of the transaction. Lest you
become aghast at me turning health considerations into a dollar sign,
let me remind you that every other purchase is treated that way. So
why not medical costs, too? After all, what we eat
has a great bearing on our health, but it is common to bypass healthy
and advisable foods based solely on their cost. We
buy life insurance not by how much we need, but by what we can afford.
The place we live and the car we drive, both of which can have
health ramifications, are again based on cost.
high-deductible health insurance plans and HSAs were intended for the
self-employed. Now they have been expanded to
include small businesses. Plus, it is likely that
our government will expand the scope of who can be covered by
these programs. We have an opportunity to adapt a
new attitude and take control of rising medical costs; let’s do so.
Read other articles
by Peter DeHaan,
sign up for Peter DeHaan's newsletter to receive
weekly writing tips and information, or visit his website:
[Permission is granted to
reprint or reuse this article, provided credit is given to the author and the
above contact information is included. Notify
and a provide copy or link.]