Self insuring health care - when does it make sense?

[Lithium]

For over 99% of people, the prospect of an unlikely, but financially devastating illness is too severe to risk, and health insurance is indispensable.  But obviously that's not true for everyone.  If your last name is Gates, Bezos, or Buffett, it isn't conceivable that a health problem could have a meaningful impact financially, and health insurance is a bad deal.  For everyone in between billionaire status and just making enough to not qualify for Medicaid, the risk/benefit analysis of health insurance is less straightforward.

Suppose you didn't have employer subsidized coverage, Medicare, Medicaid, etc.  At what point would you stop paying for a bronze plan at current prices?  If you had $10 million?  $50 million?  $100 million?

A closely related question is at what price point (given your current level of assets) you'd stop paying for a bronze plan (assume you don't have any other good options, like health sharing).  Right now it is $2700 a year or so on average for one person.  However the deductible is over $5k, so you'd pay $7500 or more before using it.  What if it were $10,000?  $25,000?  $50,000?  Or would you pay even more?

Considering that one can now get health insurance every year during open enrollment, PEC's or no, I doubt I'd purchase a plan if I had over $20 million, nor would I pay more than $50k a year for a bronze plan with my current assets.  I'm curious where the rest of you would draw the line.  Health insurance may be indispensable for most of us, but that doesn't mean the demand for it is perfectly elastic and we'll all just pay whatever we're charged.

[PhysicianOnFIRE]

I don't plan to fully self-insure, but I'll look closely at the catastrophic plans when I leave my job and no longer have employer-subsidized health insurance.

Health care costs of $20,000, $50,000, or even $100,000 in a year wouldn't ruin us financially, but major trauma or a nasty cancer could cost $1 million or more. I want to be protected from a Big Event like that.

[White.Beard.Doc]

There is one more consideration here.  The insurance companies have negotiated rates with the hospitals.  If you are self insured, you pay the charge master rate which can be 5 times more than the insurance company negotiated rate.  So even if you are wealthy, you are better off to have some kind of plan that has negotiated rates with hospitals.  A serious illness and hospitalization could cost you 500k or more.  You could simply carry catastrophic coverage with high deductibles.  You would still get the negotiated rates even when you are paying out of pocket up to your high deductible.

I am wealthy but I would never consider going without health insurance.  Car insurance is optional (on the vehicles) but I would still carry plenty of liability insurance with an umbrella for several million.  I feel I need liability, malpractice and umbrella insurance even more since I have significant assets.  If I was poor, my risks in terms of a liability claim would be minimal.

Bottom line, at a net worth of 50MM, I would still carry health insurance coverage.

[ticker]

In a former life I cared for a handful of wealthy folks (whose net worths I would presume to be in the tens of millions, at least), and it always surprised me that every one of them had health insurance.  I had presumed one would self-insure at a certain level of wealth, but none of them did.

[PhysicianOnFIRE]

White.Beard.Doc wrote:

There is one more consideration here.  The insurance companies have negotiated rates with the hospitals.

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From everything I've read about health sharing ministries or any other situation in which you are "self pay," the actual bill will be much lower than the charges typically appearing on your insurance bills. Perhaps someone who is currently self pay will chime in, but it's my understanding that's how it works.

The hospitals would rather collect a reasonable charge than send a bill to an individual for $5,000 for an ER visit when they know there's little hope of actually getting paid in that scenario.

 

[White.Beard.Doc]

PhysicianOnFIRE wrote:

White.Beard.Doc wrote:

There is one more consideration here.  The insurance companies have negotiated rates with the hospitals. 

Click to expand…

From everything I’ve read about health sharing ministries or any other situation in which you are “self pay,” the actual bill will be much lower than the charges typically appearing on your insurance bills. Perhaps someone who is currently self pay will chime in, but it’s my understanding that’s how it works.

The hospitals would rather collect a reasonable charge than send a bill to an individual for $5,000 for an ER visit when they know there’s little hope of actually getting paid in that scenario.

 

Click to expand...

In our hospital, self pay patients typically have limited financial resources.  If they jump through a bunch of hoops to demonstrate limited income and assets, they will get something over a 90% reduction of the hospital bill and a payment plan.

But if you are well off, you are stuck with the $5,000 ER bill and will be sent to collection if you don’t pay the full amount.

If you have insurance with a high deductible, you pay the insurance company negotiated rate out of pocket, perhaps paying only 25% of charges.

The folks with no job and no credit don’t seem to mind (or don’t have any viable alternative) multiple, repeat ED visits because they can simply ignore the bills that come.  I am guessing that many of them don’t have good credit to begin with.

This is just one more example of how charges and payments are a massive mess with our current health care “system”.  We got into this mess because we have never really had any logical overall plan or system that was designed to work for all members of society.  The historical hodgepodge of various sources of payment has become the “system”.

It’s pretty awful that seeking medical care in the US creates massive financial fear and stress for the majority of our patients.  Getting sick isn’t enough of a stress to begin with.  We have managed to multiply the stress of illness with the stress of navigating the financial minefield of our broken US health care system.

[Molar Mechanic]

I'm a little bit in that boat.

Between premium (18k) and deductible (14k), I decided that it simply didn't make sense for my healthy family of four.

I do use a Christian Ministries plan to blunt the pain of any significant event, and realize that it could cost me tens or hundreds of thousands between a significant event or diagnosis and the following open enrollment period.

I plan to retire early-ish, and am strongly considering retiring to the army reserves and finishing my twenty, partially for pride, and partially for the Tricare for life.

[CM]

PhysicianOnFIRE wrote:

White.Beard.Doc wrote:

There is one more consideration here.  The insurance companies have negotiated rates with the hospitals. 

Click to expand…

From everything I’ve read about health sharing ministries or any other situation in which you are “self pay,” the actual bill will be much lower than the charges typically appearing on your insurance bills. Perhaps someone who is currently self pay will chime in, but it’s my understanding that’s how it works.

The hospitals would rather collect a reasonable charge than send a bill to an individual for $5,000 for an ER visit when they know there’s little hope of actually getting paid in that scenario.

 

Click to expand...

What have you read, PoF?

White.Beard.Doc wrote:

In our hospital, self pay patients typically have limited financial resources.  If they jump through a bunch of hoops to demonstrate limited income and assets, they will get something over a 90% reduction of the hospital bill and a payment plan. But if you are well off, you are stuck with the $5,000 ER bill and will be sent to collection if you don’t pay the full amount. If you have insurance with a high deductible, you pay the insurance company negotiated rate out of pocket, perhaps paying only 25% of charges. The folks with no job and no credit don’t seem to mind (or don’t have any viable alternative) multiple, repeat ED visits because they can simply ignore the bills that come.  I am guessing that many of them don’t have good credit to begin with.

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As White.Beard.Doc describes, the provider may accept a negotiated settlement from a patient with essentially no resources, but in most instances the bill is simply turned over to a collection agency.

You (retired millionaire doctor) should expect to pay full freight.

[PhysicianOnFIRE]

CM wrote:

What have you read, PoF?

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Any review of health sharing ministries talks about getting lower rates for being self-pay and often an additional discount for paying immediately.

Here's an article from Dike Drummond, MD, who has contributed guest posts to WCI:

Medical Bills Going Down If You Pay Cash – Way Down

 

 

[White.Beard.Doc]

PhysicianOnFIRE wrote:

CM wrote:

What have you read, PoF? 

Click to expand…

Any review of health sharing ministries talks about getting lower rates for being self-pay and often an additional discount for paying immediately.

Here’s an article from Dike Drummond, MD, who has contributed guest posts to WCI:

Medical Bills Going Down If You Pay Cash – Way Down

 

 

Click to expand...

Yes POF, if you have time to negotiate in advance for cash you can often get a significant discount.  And if you negotiate after the fact, you may be able to get some type of discount.  But all of this is a big maybe.  If you have a serious traumatic accident, or a medical emergency requiring major surgery, you might not be able to get any discount.  The bill could be in the hundreds of thousands of dollars.  It depends on the hospital where you end up and their policies.

For example, MD Anderson in Texas had articles in the news about how they don't give discounts to anyone unless it is contractual through an insurance contract.

[Antares]

For a time, I was self-pay at the preexisisting multispecialty group I use because my insurance didn’t cover them. Self-pay was always more than the contracted rates. I agree that where I live a major benefit of health insurance is access to the contracted rates. That may be more valuable than the actual coverage absent a catastrophic illness.