Update: I've posted a sub-question on the math stack exchange to help answer part of this primary question. Sub-question: Toy problem: How much should I rationally be willing to pay for this hypothetical and simplified insurance?
Question (roughly): My feeling is that health insurance is insanely over-priced (for me) and not at all worth it for me to buy. But how can i know? How do i answer that question rationally? What variables / factors should be considered?
(If you're curious: cost is approx $8,400 / yr premium + ~$14,000 / yr deductible for spouse + me total for "Bronze" level coverage (this is in U.S.)).
Of course the answer to this will be "fuzzy" (there will be some gray area between the "yes, buy" and "no, don't buy" outcomes). That's okay. I just want some basis outside of my head for which to make a decision. I don't want to just say "That looks so ridiculously expensive, there's no way i'm going to pay for that."
Ideally there would be some tool where i could enter a number of personal questions (about age, health, financial assets, income, location (relevant for health risk?), etc), it would have the probabilities of risk for various diseases, etc, and would then output some reasonable cutoff range for insurance cost for me. I could then compare that price to what i would actually need to pay to buy insurance and then make a rational decision about whether or not i should buy the insurance.
Possible variables / factors to consider:
- my health.
- probability of needing medical assistance (how likely am I to break an arm, get hit by car, get cancer, have a heart attack, etc).
- what is cost of coverage (without insurance) for the things I may need medical assistance with?
- my assets.
- my income.
- what is my comfort level with risk (low, high, etc)?
If assessment calculator can tell me "yes, buy" or "no, don't buy", then it should know:
- insurance cost: premiums, deductible
- insurance coverage (ie what is covered)
What methods can I use (probability tree, risk calculator, etc) to take the variables into consideration rationally and yield some reasonable price that I could consider as the cutoff for whether or not I should buy insurance?
other keywords: rational decision making, logic, probability, health care