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?
Two answers.
I put 5k in a health insurance account every year. Most years I don’t spend it all and it slowly builds. Let’s say I have like 30k after a few years with some interest. But then I get cancer and it costs $50,000 plus $10,000 per year after that. I now am short $20,000 and I need to double my annual spending on health insurance and am no longer saving, leaving me and my family in financial trouble.
Now consider I pay 5k every year in health insurance, and most years the insurance company takes that as profit, but if I get cancer, they will cover all the expenses for just my continuing $5k/yr instead of the actual, much higher cost. The insurance company can do this and still make a profit because the vast majority of people who pay $5k/yr don’t need $5k of treatment, so it amounts to more than enough to cover the couple people who need more.
A lot of medical costs in the US are massively inflated because the hospital says “this is worth $10,000” and the insurance company says “well only pay you $5,000 for that” and then they tell you “we saved 50% on your bill! Aren’t we great!” But the real value of the thing is like $1000 and both the hospital and the insurance company and other parties like whoever is making “the thing” are in on the whole nonsense pricing thing.
This ultimately makes it even harder to get reasonable medical treatment without insurance in the US.