Hear me out on this, please.
Let’s say that I spend $5k on health insurance in a year, but don’t go to the doctor or have any medical issues in that year. Where does my money go? It disappears. I basically just gave away my money, and received nothing in return. However, if I took that $5k and simply put it into a personal savings account instead of giving it away to a health insurance provider - that money stays right there if and whenever I decide to use it. It even collects interest.
I realize that with a health insurance provider, you’re (supposedly) getting discounted rates on medical services - but if your money is just disappearing into thin air if you don’t happen to need those medical services in a given year, are you really saving money? It just seems like a really big scam to me - what am I missing?
I see two things you might be missing.
The insurance company negotiates prices for services. Without insurance, you will likely get billed more than what the insurance would pay.
Liquid savings accounts are worthless anymore. Unless you’re investing that money, you won’t see any significant interest on it. Maybe a few pennies a year.
I wouldn’t call savings accounts worthless. You can still get 3-4% APY on a HYSA or CD.
From what I understand, and I’ll be honest, finance is not my department, those generally don’t allow you to pull the money out whenever you need it. They would need to have access to those funds if they intend to pay their medical bills with it.
There was a federal law called Regulation D that limited withdrawals across all of your savings accounts to 6 per month. That was suspended in 2020 due to COVID and continues to be suspended until this day, but some individual banks still enforce it privately so check your T’s and C’s of your financial institution.
Although imo 6 withdrawals from savings per month should be more than enough.
That is not the case with mine. It’s about 3.5% variable, sometimes over 4%, plain cash savings account in the US. I can transfer from savings to checking at another bank on the same day and withdraw whatever I want. As the other reply from cattywampas said, the number of withdrawals is limited but that’s no issue for me.
Unless you’ve committed to a 5 or 10 year CD, you probably can defer the payments or split them until the CD matures so you don’t forfeit the interest. Also, for proper CD planning, it’s probably best to use a ladder strategy where you have multiple CDs and staggered so one matures every year for you to decide if you need the cash or can reinvest it.
They should round up those pennies since you know, they’re no longer being produced.