Arman's stuff
Taxes, healthcare, and you!

(Fri Sep 4 16:54:52 2009)

Insurance (as we know it today) is just a bad idea.

I'm not a lawyer, a tax professional, or even an individual reasonably well-versed in health care costs. I can tell you, however, that I'm saving money by not getting insurance. I'm saving me money, and I'm saving you money, too - your taxes aren't going to pay my bills.

Let's start with insurance. Currently, to get full medical coverage for my family through my company ($1000 "free money", followed by $1000 deductible, followed by 80%), I pay roughly $200 per pay period, or $5200. The money I would pay in doesn't count towards taxes (hypothetically); according to a handy online tax calculator, the $5,200 insurance premium would save me $780 in taxes.

Ok, so that covers cost and tax savings. So how about bills? Well, this year, my son went into the emergency room; ambulance, hospital, and independent consulting fee came to just over $6,000. After negotiations, the hospital agreed to lower our bill, leaving only $1,600 that we owed. We also went to the doctor a few times for my second son, for new baby check-ups. All told, those visits will come to around $400. Further, let's say the whole family gets strep throat or something later this year, and we have to go to the doctor; visit plus meds would be around $160 each, so just under $500. Before negotiation, that would total about $6,900; after, about $2,500.

All right. Now let's total up what it would cost me to have insurance, assuming I never touched it:
$5,200 premium - $780 taxes = $4,420
And what the insurance company pays of medical bills:
$1000 + ($6900 - 1000 - 1000) * .80 = $4120
That is, $1000 of "free" money, plus 80% of the rest after deductible. The insurance company probably pays less, since they would do the same negotiations I did, but they'd never pass that on.
Finally, what I would have to pay of the bill anyway:
$6900 - $3120 = $2,780

So, what do I pay?
$4,420 (insurance minus taxes) + $2,780 (deductible) = $7,200
After taxes and "free" money, I would pay $7,200 for insurance and bills. Ouch. That means I would pay *more* by having insurance! $7,200 - $2,500 = $4,700 more, in fact! So at what point would I break even? When would insurance be "worth it?"

Money I pay:
$4,420 + $1000 deductible + 20% of the rest
Money they pay:
$1000 "free" money + 80% of (the rest - $1000 deductible - $1000 "free" money)

A bit of algebra, set one equal to the other:
$4,420 + $1000 deductible + 20% of the rest = $1000 "free" money + 80% of (the rest - $1000 deductible - $1000 "free" money)
5420 + x * 0.2 = 1000 + (x - 2000) * 0.8

x = $10,033.33

Whoa! I would have to spend more than *ten thousand dollars* before it would ever start making sense to have it in the first place! Never mind that that does not cover "cash price" discounts; the $6,000 down to $800 discount would add even more in the "no insurance" side's favor.

Now, don't get me wrong. I'm all for insurance. In fact, I have independent insurance from outside my company, and I get my company's dental and eye - because the $340 a year I pay for eye insurance goes a long way towards $300 glasses and a $100 visit. Even if we don't buy glasses, I'm still willing to pay for it, because the peace-of-mind is worth a few hundred dollars. Peace-of-mind is not, however, worth $10,000, or even $5,000 (as in this case). What I would like is a simple payment system - you pay us $200 a month, and we pay every bill your family has over $10,000. Or better yet, a health savings account - I pay them, they put my money into a savings account, and whenever I have an emergency, I pull money out. Easy, and if I manage to go some years without spending more than I put in, I can happily accumulate my money without worry of it going away at the end of the year.

So what's my conclusion? Unless someone can prove to me that it is financially worth it, there is no way that I'm going to get insurance.

And that's pretty much that.

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This blag is tagged: Healthcare, Insurance, Taxes, All