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Why Health Insurance Is a Waste of Money

A brief overview...
  • Some people believe that a high deductible plan is a waste of money
  • Health insurance is there to pay for those unexpected medical issues that may happen without warning
  • They avoid you having to pay huge costs for treatment or drugs and protect your financial status
  • Shop around and check out the different types of health insurance to see which is the best for you

Have you ever grumbled as you paid your health insurance premium and said “Health insurance is a waste of money?” Everyone has probably entertained this thought at one point in time or another. That’s because we are conditioned to think about getting something tangible in exchange for money we spend.

We go to the store, and we come home with a handbag or a new suit. We shop online and in a few days, we get something in the mail that we ordered. We have tangible proof that we ordered something, paid for something, and conducted a transaction.

This is not the case with insurance. When we purchase health insurance, we may tend to think that it is wasted money because we do not have anything to show for it until we get sick.

But remember that health insurance (and all types of insurance) were invented for the purpose of paying for things that you cannot foresee might happen in the future. It is the unexpected things that end up costing us the most.

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Health Insurance is Like the Fix for a Flat Tire

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To illustrate this point, think about a normal month’s budget. You have enough income to pay your bills and even put some in savings each month. Then the unexpected happens. You have a flat tire. You think it will be an inexpensive trip to the local gas station where you will air up your tire. You drive into the mechanic’s shop and ask them to fix the flat. Then the mechanic gives you the bad news: the tire is irreparable.

What started out as a $15 fix-it job has now escalated into an $85 tire replacement. But it gets worse. Since your car requires both front tires replaced at the same time, you end up having to buy two tires instead of one! Now you’re up to $170.

Just like “that,” you have broken your budget, put off your savings plan, and you will now have to put off something else to afford the two tires you need.

Having to replace two tires at the same time is similar to not having health insurance. You never expect to get sick or have an accident. But things happen. Then you will find yourself having to pay high costs out of your own pocket for unexpected expenses.

Health insurance steps in where your budget leaves off when you have an unexpected medical problem. It could happen gradually, or it could happen over a long period of time. Either way, insurance is necessary to avoid the huge cost of paying for it all yourself.

How do I choose a health insurance plan?

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When it comes to choosing health insurance that will be there when you need it, we know it can be confusing. With Obamacare having problems due to so many private insurance companies stating that they had to bailout or face bankruptcy and closure of their businesses, people are scrambling to find a better health insurance plan.

But the fact that some health insurance is on a downhill slide doesn’t mean that you should give up and accept the fact that you should pay everything yourself. Instead, you should use this as an opportunity to find a better health insurance plan as quickly as possible.

What about deductibles?

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Deductibles are the obstacle that you have to get through before your insurance will start paying off. Deductibles are also why many people think that health insurance is a waste of money. They think that, if they get absolutely nothing for the money they are paying in toward their health insurance deductible, they think it is wasted money.

But this is not true. They are paying their share of the expenses until they reach their deductible limits. Then the insurance will pay the rest of their expenses for the remainder of the calendar year. This is similar to a co-pay in insurance, such as you see with HMOs (health management organizations).

The difference is that, with a deductible, you have to pay all of your expenses until you reach the deductible, then the insurance will pay the rest. With HMOs, there is a co-pay along the way with doctors’ visits and medications so that it is easier to pay.

Choice vs. Cost: The Pendulum Swings

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When it comes to choosing the right health insurance for you and your family, you must make a choice between choice vs. cost. This is more true with some types of policies than others. But when you choose an HMO, for example, you get a low cost. But you must have a PCP (primary care physician) that refers you if you need a referral to specialists and they must be in the network that is prechosen by the management group before the insurance will pay.

In reality, you may choose a health care provider who is outside the network, but your cost will go up. This type of system relies on many people being in the network to support its infrastructure, much like The Affordable Healthcare Act did.

HMOs and The Affordable Care Act

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In fact, many have argued that Obamacare was nothing more than a long-term extrapolation of the original HMOs developed and signed into law by President Richard Nixon in 1973.

Whether or not this is true remains to be seen but Obamacare certainly has many of the characteristics of the early HMO plans which were designed to serve many people at once and which relied on doctors, practitioners, and patients alike all buying into the idea.

How to Choose the Best Plan

There are many private insurance companies that allow you to choose between different medical delivery models such as HMOs, PPOs, and other types of health care systems. Many of these are starting to phase out to some degree but some form of these systems will remain within the structure of private insurance.

Most private insurers believe in empowering the individual with a choice regarding their individual health care plan. They tend to want people to choose their doctor, their specialists, and their system that works best for them over the long run.

To choose the best plan for you, you should check out several different types of insurance companies and policies. Look at the fine print. Read the exclusions. Exclusions are those things that your insurance will not cover and that you will have to pay out of your pocket.

High Deductible Plans

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If you decide to choose a high deductible plan, you will want to look into HSAs (Health Savings Accounts) as well. HSAs help you build a savings account for the purpose of paying for out-of-pocket expenses such as prescription medications and other out-of-pocket expenses.

You should weigh carefully whether you want a high deductible plan. This means that you will have to spend up to the limits of the deductible (from $5,000–10,000 or more) before your insurance pays for anything.

For some people who are rarely sick, they may choose to take this risk. This is entirely up to you. But consider the fact that no one knows for sure when you will need your insurance. If you have a $5,000 deductible, your insurance will pay nothing until your deductible has been met.

There is no one fix for health insurance. Just like the unexpected flat tire in our analogy earlier, you never know when you will have a flat tire. When you do, there is no quick fix for most issues. You just have to hope that the problem is not so big that your insurance will not be enough to cover it.

Shop and Compare to Save

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Ask a health insurance expert to give you a free quote and shop and compare a variety of policies until you find the right one for you. You never know when you may need it, so you want it to be in place when you do.

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