Is US health insurance just a terrible deal overall for a healthy young adult?

Question

Since it is open enrollment period, it is once again time for me and my family to review our decisions about our healthcare insurance. These days, there are quite a few nuances to healthcare insurance with things like copays, coinsurance, in/out of network, HMO vs PPO plans, preventative care coverage, HSA/FSA accounts... However, no matter how I look at it, it seems like they're all terrible deals.

The goal of the health insurance decision is probably the same for everyone: Get a reasonable amount and quality of healthcare services for the lowest total cost. Every time I review the details of the healthcare plans available to me, I arrive at the conclusion that the way to accomplish this goal is:

• Give up entirely on having any sort of meaningful coverage or benefit from any of the plans
• Just pick the plan with the lowest premiums (ideally I would just decline insurance entirely but the government charges a sizable fee for that)
• Expect to cover all healthcare expenses out of pocket and act accordingly (saving on the premiums helps here)

I feel like this can't possibly be right, because it's so counter-intuitive and illogical. I get that the government is inefficient sometimes, but surely I'm missing something here. For the sake of example, me and my husband are both about 30 years old, have average jobs with average quality of employer-sponsored plans, don't have children and not planning to, in reasonable good health. We don't have any major disabilities or chronic illnesses, but like most people, we have occasional minor health expenses which probably would add up to ~3k per year had we been uninsured. We exercise regularly and try to live reasonably safe lifestyles (not riding motorcycles or the like). We don't have millions in savings, but we have a few 10s of thousands - it would probably pay for a medium-size expense if it came to that, although we would rather conserve the savings.

The plans with high coverage have huge premiums, often adding up to around 10k per year. I would consider these a "pay a lot up front but then never worry about healthcare expenses again" type deal, except it fails in that regard because:

• Still have a deductible of about 1k or so, so the first 1k is not even covered
• Still have a copay of 10-20%, so it's not like I would at least get to not worry about how much the doctor visit will cost
• There are mandatory minimums of $10-20 for medicine and doctor visits for almost everything
• The selection of doctors is okay, but not that great, and you often end up deciding between a so-so in network doctor and a great out of network doctor (who you have to pay full price to because they're not covered despite the enormous premium)

With this approach, we are guaranteed to spend at least 11k or so every year if we have no unexpected health problems. The expense is also not even capped at 11k if we do have problems. So it seems like "pay a lot more in the best case, maybe pay even more in the worst case" option.

There are some more moderately priced plans which end up costing around 6k annually. These are basically the same as the high-coverage ones, but with the negatives being slightly larger (eg. ~30% copays instead of 10-20%).

The only cost-competitive option tends to be an HMO, which still ends up costing 4k or so, but at least provides actual comprehensive coverage with few or minor fees on top of the premium. Of course the catch is that you're stuck with the HMOs own doctors, which in practice seem to be quite bad and sometimes downright antagonistic (eg. denying your medical conditions so the network can get out of paying for the treatment).

The only reasonable option seems to be cutting our losses with the lowest-premium HDHP plan, add the money saved on premiums to our "rainy day fund", carefully price-shop and negotiate when going to the doctor (at least we're not restricted in shopping around, since they're all out of coverage), just accept that we won't be able to go to the doctor unless it's really necessary, and do our best to "not get sick". Is this really the system working as intended for healthy, young people like us, or am I missing something?

Note that this is based on our experiences with several employers over the years, both me and my husband working in different companies, across different states. Consistently, our options seem like what I described above or strictly worse.

Answer 1

The goal of the health insurance decision is probably the same for everyone: Get a reasonable amount and quality of healthcare services for the lowest total cost.

I'd disagree with that goal. The goal of health insurance is to protect you against catastrophic health care expenses.

The second goal is to choose insurance that provides the minimum amount of protection necessary at the lowest cost.

I typically find that the lowest-premuim, highest-deductible plans are the most cost-effective in the vast majority of scenarios. It requires you to save for expenses on your own, though, instead of paying the insurance company to "take care of everything for you"

You should not expect to make money off of insurance, meaning you shouldn't expect to get back more than what you put in. If something bad does happen, that is when you benefit financially from insurance. If you are healthy and have no significant problems, you should expect to pay for more than you needed, and consider yourself fortunate that you didn't need that additional protection. Instead, you're paying extra so that someone else doesn't have to.

Quality health care in the US is incredibly expensive. Your employer and the insurance company will hopefully subsidize a good portion of that by paying for a portion of your premium and by contracting with providers to lower costs, respectively.

just accept that we won't be able to go to the doctor unless it's really necessary, and do our best to "not get sick".

I don't know about your specific costs, but I can go to the local urgent care clinic and get seen for most non-emergency issues (and even minor emergencies like broken bones) for less than $150. If things escalate from there, then you're looking at more expensive hospital/specialist visits where your deductible will come into play. If you're going to the ER for a fever or runny nose, then you're not using the system wisely.

(I don't mean to be insensitive here - I know things happen in the middle of the night and cost isn't the main concern when your children's health is at stake, but I've seen several people go to the ER during the day or wait until the middle of the night when there are other, more efficient methods available)

The way I budget for it is to put aside 1/12 of my deductible, plus some extra to cover out-of-pocket expenses, every month into an HSA (my employer also contributes some which is "free money"). The HSA lets me "prepay" for expenses even before it's fully funded. That way, even if something catastrophic happens in January, the HSA will let me pay for it upfront and I can "pay it back" over the year. If I lose my job, I just need to pay pack the HSA eventually (thankfully I haven't had to find out the details of that process yet).

Answer 2

There are three reasons for the unattractiveness of your options:

(1) The US has been experiencing extraordinarily severe healthcare inflation for generations. In 1980 our spending as fraction of GDP was in the same range of other rich countries, but we've experienced almost 100% growth since then, while others had about 25%. We do not get better care by spending more. In fact, we get about the same outcomes as Cuba. Our system is just incredibly inefficient, for a variety of reasons.

(2) The traditional purpose of insurance is to protect people from low-probability risks, so it will always look like a bad deal based on a typical year in which nothing bad happens.

(3) Chronic conditions account for 84% of total spending. Society has decided that young, healthy people like you should help to subsidize the sicker and mostly older people who incur these costs. Paying for this is not very beneficial to you right now for the same reason that paying for social security isn't -- you're not using it yet.

Europeans who smugly pronounce their system to be superior are off base in my opinion. They pay a lot of money for care, but that cost is hidden in their taxes. It's true that their healthcare systems are more efficient than ours (item #1 above), but that has little to do with the fact that ours is employment based. For example, Singapore and Switzerland both have somewhat market-oriented or mixed capitalist systems that are much cheaper than ours, and work much better. The unique awfulness of the US system has more to do with the details of its implementation and history than with the fact that it's market-oriented and employment based.

Answer 3

You don't have any chronic health issues... yet. You can find out tomorrow that the genetic lottery has given you some sort of rare genetic defect. You can get cancer at any time, you can get in a car accident at any time. It is health insurance, in insure that if something happens to you, you will have a way to return to a previous healthy state. Health insurance does not aim to give you anything more than a way to insure a general health state.

Thinking about insurance in a way of I paid X so I should get Y is faulty reasoning. It is like paying for car insurance for 5 years and then complaining because you where never in an accident and did not get anything for your premiums.

Answer 4

Other answers have touched on pretty much everything but I'm going to cut to the chase here. I am not advocating for the US system or against it, I am just going to try to explain somethings I think you are missing. First off:

The goal of the health insurance decision is probably the same for everyone: Get a reasonable amount and quality of healthcare services for the lowest total cost.

Most of the answers focus on this. That's not what insurance is for. For example You don't get car insurance in order to get cheaper car repairs, you get car insurance in order to avoid paying for those repairs (among other things.)

What makes this confusing for people is that most healthcare plans are designed to try to avoid costs in the first place. An annual checkup might be cheap (or free) because it's far cheaper to deal with a serious medical condition early than to wait until it has become severe. If you can avoid becoming diabetic, for example, the insurance company saves a huge amount of money over the life of your coverage.

The only reasonable option seems to be cutting our losses with the lowest-premium HDHP plan, add the money saved on premiums to our "rainy day fund", carefully price-shop and negotiate when going to the doctor (at least we're not restricted in shopping around, since they're all out of coverage), just accept that we won't be able to go to the doctor unless it's really necessary, and do our best to "not get sick".

Are healthcare costs really your motivation to "not get sick"? I'm not understanding your logic here. At one point, you say "ideally I would just decline insurance entirely but the government charges a sizable fee for that" but you are complaining about paying 30% of the cost of going to the doctor. Would you prefer to pay 100%? Isn't 70% of the cost of going to the doctor a benefit to you financially?

Lastly one thing that I haven't seen the other answers really address: if you don't have insurance, you will most likely pay much more. What I mean is that your aren't paying 100% of the insured patient rate, it's going to be a 'special' rate which is very unlikely to be lower than what an insurer can negotiate. Bit by a strange animal? You could end up paying $50K for treatment.

You, as an individual have no bargaining power. You don't get an estimate for your treatment (and you might need it to live, anyway) and the hospitals have debt collectors. In plain terms, if you need treatment and are uninsured, you are screwed. Going without any insurance is very risky in the US.

If you don't think you will need to use your insurance, go with the lowest priced HDHP you can get. These plans are expensive because healthcare is expensive in the US. And despite the popular belief, it's not due to the insurance companies. They are not terribly efficient but they aren't causing the high costs: most of the money goes to providers and drug companies. As long as the populace of the US thinks the insurance companies are the sole cause of the problem, nothing will get better.

Answer 5

The goal of the health insurance decision is probably the same for everyone: Get a reasonable amount and quality of healthcare services for the lowest total cost.

Not at all. Health, for young people, is like a reverse lottery. Most people remain in decent health, but if you "win" this lottery, you may end up not just horribly sick, but destitute at the same time - too destitute to even do anything about the health condition.

Not having health insurance, even when you are young, is like voluntarily signing up for the Squid Game. Not a good idea.

The goal of health insurance (and really, any insurance) is to spread the cost of such a catastrophic event across all of society, so your misfortune of having breast cancer at age 27, or a brain tumor at age 35, or diabetes since childhood, can be treated, and you can return to a normal life.

Answer 6

Is US health insurance just a terrible deal overall for a healthy young adult?

Yes, in the same sense that mushrooms on sale at $0.05/ounce are useless if you don't like mushrooms. Then one day you do like mushrooms but they're $5/ounce because you didn't support them at the old price. You should have timed liking mushrooms more cautiously.

Basically you're a healthy young adult until you aren't...

Answer 7

I have some personal experience to share (from the United States).

For the sake of example, me and my husband are both about 30 years old, have average jobs with average quality of employer-sponsored plans, don't have children and not planning to, in reasonable good health. We don't have any major disabilities or chronic illnesses, but like most people, we have occasional minor health expenses

I am also around 30 years old and have no children. I consider myself relatively healthy, primarily because I frequently ride a bicycle. Nothing extreme like mountain biking, but primarily commuting along bike paths and side roads through my community, and I have been doing this for years without any issue. However, this August I got in a significant bike crash.

The plans with high coverage have huge premiums, often adding up to around 10k per year. I would consider these a "pay a lot up front but then never worry about healthcare expenses again" type deal, except it fails in that regard because:

• Still have a deductible of about 1k or so, so the first 1k is not even covered
• Still have a copay of 10-20%, so it's not like I would at least get to not worry about how much the doctor visit will cost
• There are mandatory minimums of $10-20 for medicine and doctor visits for almost everything

My insurance policy also has a 1k deductible, which is a major deterrent for use with any minor injuries, as you usually don't reach the 1k, so you pay everything out of pocket anyway. My bike accident was the first time I had to use the insurance, but I learned that my company's insurance includes what is called an "accident rider policy" which covers any accidental injury requiring medical attention. My policy covers the first 5k used for assessing and treating the injury with a 0% copay, then after that 5k, normal insurance deductibles and copays kick in.

With the description of your situation, something like this may be useful. It definitely helps solve your concerns about deductibles. In case of a minor accidental injury, you can have it checked out. If no major treatment is needed, you do not pay any deductibles or co-pays out of pocket. Ordinary insurance would apply for any sickness, hereditary or otherwise, but accidental injury seems to be the greatest concern here.

This policy surely increases the premium, but it is standard for my company's insurance, so I don't have anything to compare it to. Still, it might be something to look into. A quick Google search yielded several hits on "accident rider policy" (this is different from "accidental death", so ignore any results about that). I don't want to include any links here, because my search results were all connected to specific insurance providers advertising their own insurance.