Because hospitals charge a thousands dollars for an aspirin.

Insurance only has to pay like a dollar. But YOU would be lucky to haggle it down to $40.

Let try this, why don't we pool our money into a big savings account of pretax dollars for everyone in the entire country and add a supervising org that works with hospital networks to keep cost low through collective bargaining. At some point we the hospital networks become a single national network.

Insurance is always a technical gamble. If you need it for something moderate to big you'll easily run up a much higher bill than 5k. Could even be enough to eat the years of savings you had.

If you had paid that 5k that year, you'd still have your savings.

A single complex surgery can have billed charges approaching $1,000,000, and that's if they will even perform the surgery if you're ininsured. Your $5,000 a year won't even cover the interest charges and your only way out if the hospital won't reduce the debt is bankruptcy.

Because everything costs more than you think. Having a child without insurance is often over $100,000. Any visit to the ER for an emergency? $25,000 to get in the door and often millions of dollars if you need lots of interventions. Heck, even with insurance, chronic conditions often cost thousands of dollars per year. Even simple procedures like my daughter's tympanostomy tubes have self-pay prices in the tens of thousands of dollars.

I have Acute Myloid Leukemia.

In the State of Oregon, to treat that with a side trip through "lets get a bone marrow transplant land" it costs $2 million dollars.

I had a doctor state that they don't know what causes Leukemia, but it's not genetic, so there is nothing I could have done to prevent it and my family didn't give it to me.

Are you going to save up $2 million dollars in case you get diagnosed with something that does not have any symptoms? Because I didn't have any. One month I was fine, and the next I couldn't get to from my car to my desk at work without stopping somewhere along the way to rest.

To a certain degree, I see your point about paying for something that you are not really using. It sucks. But if you need it, it is really nice that you already have it.

There is a reason why some people literally go bankrupt with medical bills. Even with insurance, it can still get pretty costly.

Ask yourself what happens if you get diagnosed with cancer in that first year instead of staying healthy.

Because you probably won't get a multi-million-dollar cancer, but might. Or, looked at another way, someone will get cancer, and with insurance everyone is just a little less well off, instead of a few people being absolutely ruined.

I know little about American healthcare, but that's how insurance in general works. (From what I've heard, there's also a premium that just goes to anticompetitive bullshit in that specific case)

So being Canadian I have a different outlook. My province used to charge $1500 per year for health coverage so that everything was "free" at point of service. Then we changed political parties and they dropped it to $750 per year, years later to $0 per year. (The idea being if you are struggling then any monthly payment could would be a hardship).

So now we pay nothing for healthcare and my income taxes went up $270 on first 50K, but at least I'm not paying $1500 or $750.

So cheap health care and still save 5K for retirement

Your idea is to not have insurance. This makes sense for expenses you can cover from your own savings. It makes less sense for expenses you can't cover from savings. This is why insurance was created, it is a way to pool catastrophic risks where the majority who won't need it (as much) cover the costs of the minority that does.

For health insurance specifically, it doesn't make economic sense to not cover the entire population, which is why top economies implement such a system in various ways.

In the past 3 years my father has been billed millions of dollars in healthcare. If he had a health savings instead of insurance, he would simply be dead now. The better option is public single payer healthcare. Insurance sucks, but health savings is simply worse. Pooled risk spreads out costs. If the government pools the risk then they eliminate the needs for constant financial profit growth at the expense of the insured.

The problem is it's not 5k, it's like 500k and you won't save that in time. Some people do what you say and as long as it's checkups and colds they're fine, but if they get in an accident and need surgery, they can't pay the whole bill. Insurance doesn't pay it either, they negotiate. But the hospital won't negotiate with you like they will with them. You get full bill.

My cancer surgery this year and my wife's hospitalization combined to hit $600,000.

You aren't paying that with a savings account.

Well yes, but our system is rigged against us. HSA accounts are kind of what you're looking for.

I see two things you might be missing.

1. The insurance company negotiates prices for services. Without insurance, you will likely get billed more than what the insurance would pay.

2. 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 don’t see this in other replies, even though it’s incredibly obvious, so: insurance for most people comes as a benefit from work or from the government. So you get something, you take it. Your question only applies to those who are not eligible for any kind of subsidized health insurance, which is rare for those who could otherwise afford one.

Most people lose money to insurance. It's a method of mitigating risk. You're accepting a modest regular payment in exchange for not needing to build up a big reserve (or go into debt) in case something really expensive comes down the line.

Life insurance is kind of similar. If people saved the money they pay for it until they do die, on average that saved amount would be more. But having life insurance while healthy and working means that in the unlikely event of your death, your beneficiaries will be compensated for the loss of the income you provide when otherwise they would be SOL.

One, as many point out, insurance is about covering the extremes. Most people won't use as much money as the premium, but others...

For example, a relative of mine got a rare cancer, that is pretty treatable, but the medicine alone would have cost 10k a month, ignoring the frequent oncologist appointments. No amount of savings would have covered that. Even a single visit to an ER could more than wipe out a couple of years of premiums.

The other thing is the discounts are no joke. Now if you are truly uninsured, many of the providers will upon negotiation give you some severe "break", but you have to fight every time and your results are unpredictable. The insurance companies have lots of leverage, and the providers jack up prices to make the negotiated rates look good compared to their alleged list prices.

Two answers.

1. The theory behind why insurance is supposed to exist in the first place.

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.

2. The toxic system in the US

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.

how much is in your savings account? Colleague just got an upper endoscopy, in a hospital for some reason: $58,000.

Insurance helps if you see doctors regularly, and can hopefully keep you from, like, losing your house if you get some catastrophic illness or injury.

As others have said, insurance is for covering the catastrophe that you can’t, but also …..

My teen recently had a paperwork issue refilling a prescription. Originally they couldn’t find our insurance info and tried to charge $335. However they eventually did, and it was just $30 copay

You're not missing anything, it is a giant scam.

Your money is going to the profits if the shareholders of your health insurance company.

The only part of the US economy that is actually growing substantially in terms of workforce... is the healthcare sector.

And that's not mostly doctors and nurses.

It's mostly paper pushers.

There are so many healthcare paper pushers now, that if you actually waved a magic wand and implemented a single payer system with much more sane pricing for everyone and a less bloated set of paper pushers... something like a million or two million peoole would lose their jobs.

This country is fucked.

Everyone trying to explain to you how the concept of insurance works is giving you a needlessly complex explanation.

There are many countries that have public health care that works better and costs less, some that even have private insurance options that are no where near as insanely price gauging as the US system.

Our system is a giant, legal, fraud/scam, that intentionally makes things as expensive as they possibly can be, and delivers as little service as it possibly can, all that corporate c suite and shareholders can quite profit off of your misery.

There is such a thing as a tax deductible HSA (Health Savings Account)

In broad terms, you don't buy insurance because it has a positive expected return.

You buy it to hedge against risk, to spread risk out.

Let's say --- completely pulling numbers out of the air --- that there are 10,000 houses in a town. On average, one of them burns down each year.

What the insurer does is take money from all of those people, pool it, and pay out to the one person who gets impacted.

You buy insurance and pay maybe, I don't know, 1/5000th the price of the house per year. In the long run, you'd expect to come out behind on that, since that's more than 1/10,000th the price of the house.

But...people don't necessarily value things linearly.

In the absence of insurance, the person whose house burns down is out a house, which he may consider to be really bad. He may not consider 1/10,000th the price of a house a year or 1 in 10,000 possibility of losing his housing entirely to be equivalent.

If you'd rather have a predictable expense that you can plan around, that's what insurance provides for.

There can be some other benefits --- like, an insurer has time to evaluate relevant factors, like to determine things that might reduce fire risk and to say that you have lower rates if you do X, Y, and Z. An individual probably doesn't have the data or time to do that. But it's really the risk mitigation that's the driving force behind insurance.

In general, you want to take the highest deductible you can afford to take on insurance. If you can afford to cover a $5k unexpected expense, then you want a $5k deductible, so that in the event of an incident where insurance pays out, you pay the first $5k. That way, you're not paying for risk mitigation that you don't care about, on that first $5k. Your rates will be lower.

If you can afford to cover an unexpected expense at any level, then you may well not want insurance at all, since you don't need risk mitigation.

Congrats you just described high deductible plans with an HSA.

Insurance is (partly) in case you have a huge expense, exceeding the amount you could save. Like getting hit by a bus could mean millions in expenses. Insurance spreads that risk around. Unfortunately it's dysfunctional in many ways, but that's separate.

Insurance is a scam, pure and simple. But the system is set up to force you into it.

It all comes down to the dreaded ER visit that could be deep into 6 figures+. That's honestly the only reason I have insurance. I actually needed it a couple weeks ago too.

That money went into the care of others who got sick, administrative costs, and because everything is for profit, you helped pay for someone's vacation home. Eventually, if you get sick, the premiums of other people pay are used for your care. Insurance operates because not everyone needs to use it at the same time. If everyone needed to use the insurance at the same time, the insurance company would not be able to pay for care and would go bankrupt.

The same thing happened during the sub-prime mortgage crisis of 2008. Banks lent people money with variable interest rates to purchase homes. (These were predatory loans, and they were being given to people with questionable credit who otherwise would not be able to get a home loan.) The banks then turned all of those variable rate home loans into housing related securities, which let investors in those programs earn interest on buying a tiny slice of the mortgages. When banks raised the interest rates on the people with those home loans, suddenly people couldn't afford their mortgage payments and defaulted. Many of those variable rate loans were required to get mortgage insurance to protect the lender against the loan takers defaulting on the loan. Those mortgage insurance companies were flooded with claims. AIG, one such company, faced billions in losses from credit default swaps and its securities lending program, pushing the firm to the brink of bankruptcy.

Back to health insurance talk. As a consumer, the nice thing about medical insurance is it caps your costs due to a catastrophic event via something called a maximum out-of-pocket, (Max OOP.) Assuming you have a deductible, the money you spend to meet the deductible, and copays you pay after that count towards the Max OOP. When you hit the max OOP, you're covered in full, for the rest of the calendar year. I don't have a deductible; my max OOP is $6,350. If I spend $6,350 on co-payments, my co-payments stop until December 31, and it resets when it rolls over to the next calendar year. Without insurance, a catastrophic health event would cost hundreds of thousands of dollars and would absolutely bankrupt me. $6,350 would also put me under financial strain, but it's something I could recover from financially, and probably wouldn't have to file bankruptcy over.

Here's an honest answer from someone with a chronic illness. In the US, we don't have real health insurance, so it's more like you're paying into a racket for some discounts and peace of mind in case you have a sudden acute condition. If you're lucky enough to be able to work, you will (hopefully) have an option between the cartels insurance providers. If you're a betting man, you should pick the lowest premium plan with an HSA, which is essentially what you're describing, plus you don't get taxed on the money.

But people will say, what if you get cancer the first year? You're screwed anyway, because it's not like the insurance just goes "oh I'm so sorry you got cancer, don't you worry, we'll cover all the costs." No, of course not. They'll fight you every step of the way, so at that point you are just better off going to another country and paying for treatment out of pocket.

But wait, other countries don't have the same new or experimental treatment options as we do. Well, insurance often doesn't cover those anyway, so if you are pretty desperate and you truly need those, you either fight for coverage, and I hope you haven't lost too much of your support system from the isolation of poor health because the stress of doing it alone may kill you regardless, or you pay out of pocket until you go broke.

There is also sometimes the option of medicaid or going on disability. You may go on medicaid anyway because good luck keeping a job and managing doctors appointments (oh my specialist can't see me for another 6 months? Yeah put me on the wait list for cancellations), medications, and fighting the aforementioned insurance denials. Medicaid at least is actual state sponsored insurance, but remember Cs get degrees and As get high pay. As don't typically accept medicaid pay rates unless you live near a big research hospital and can get their attention. Regarding disability, you shouldn't really consider it unless you're hitting rock bottom because it takes years to get on it only to have your savings capped to an insulting level that keeps you perpetually impoverished.

So you're not really missing anything because it is one big racket.

US health insurance is basically a scam. Saving the money makes way more sense statistically. But A) insurance is there to minimize risk (of going bankrupt by being sick) and B) people (especially US Americans) tend to spend all the money they have, and money you already spent on health insurance is money you cant spend elsewhere.

If you are rich, you can self insure for everything. Home insurance costs us 4k a year on average, for 25 years now. They insure up to about 300k. No claims. Do that math. If I had a half million to escrow, no way would I be paying that. I would just hold onto enough to rebuild and let it make money.

Health insurance like I carry should also cost a lot less than it does, but I guess it's the same kind I would have if rich, high deductible but insured against very high cost events.

When I was poor, though, no health insurance and overall we paid less every year, than I pay for insurance now. Yes even the years I gave birth and even the years there was an emergency room visit, not carrying insurance was cheaper than having and using it. But the problem with that here is that unlike home insurance, the possible cost of care is essentially unlimited without any insurance. You could get some disease and end up with tens of millions of dollars of bills. It ought not be like that but it is.

You don't want a personal savings, you want a health savings account (HSA). this is a pre-tax account that you own and can use to pay medical bills. This is usually in addition to regular insurance though.

It's usually used to pay out of pocket medical bills. For instance, you have a surgery and need to pay 5K out of pocket and insurance pays the rest. You can use the HSA to pay your portion so nothing needs to come from your personal savings.

This is what I do. It's far cheaper then any level of insurance i can purchase, especially since no matter what i can't cover my significant other.

From what I understand, aside from what everyone is saying, the insurance companies end up not lowering prices but raising them. The hospital essentially makes up inflated pricing (the $600 aspirin joke) and then the insurance company fights for a discount of that price. It's scumbags ripping off scumbags at that point, but I'd almost be convinced that prices would be lower if there was no fat cow insurance company to scam out of as much money as possible.

Your money goes to all people that got sick and needed that money for treatment that year. And when you get sick their money goes to cover your expenses. If you never need it, congratulations, you're a very lucky and/or healthy person and you can feel good about the fact that you helped a lot of people get treated. If you do need it, there's money to cover your expenses, even if the cost is more than what you ever paid in total.

So I'm not sure what is happening in this post. The premise is ludacris and the top responses are nonsense.

A five mile ambulance ride to the hospital for non emergency services is like 5k alone.

A simple conversation and basic exam by a doctor is 300 bucks on the low side. That's just the doctor with a stethoscope checking your heart and lungs.

If you have to go to the emergency room you're done.

That's why we have health insurance here. It's basically a racket.

The problem is that insurance companies negotiate lower rates than what you would get if you pay out of pocket; this coupled with the tact that jobs that provide healthcare don’t offer it as a choice, means that for the vast majority of people its a black box that is difficult to escape from, and if you do then you get screwed on price.

Health insurance is a scam, yes, it's part of the bigger scam called capitalism, which is the privatization of profits and socialization of losses. A private "savings account" is not escaping the scam, it is at best side-stepping it, into a different method, even less efficient, where everyone in society just does (and pays for) every little thing on their own. Why don't we all just pay individually for each unit of oxygen we breathe?

Something better would be simply that we find a way to efficiently pay for everyone, as much as possible, to have healthcare (among a number of other things). Until something better can exist, this is "public insurance."

its a risky gamble, if you suddenly get injured, or have a severe infection you will be paying OUT OF THE POCKET from a general hospital, and its many times more than paying multiple months of insurance. same goes for dental care, if you have sudden tooth pain, if you are lucky to find emergency dentists, they can charge several hundred for a limited exam w/o insurance. you can try free clinics, or universities for "healthcare', but often time they are booked weeks to months in advanced and they take a long time to register you as a new patient, due to them being students which have priority over providing dental care.

let only prescriptions are very expensive wholesale/retail cost, even if you use a coupon for it somehow. my parents opted of not paying dental care 1-2years and they had worsening teeth issues, and they ended delaying care and it costed alot more now since it precipitated into root canals, and implants.

and yes general healthcare insurance is quite scammy. UHC being one the worst offenders out there. its also political asf since health insurance has a vested interest in discouraging any laws for universal or regulated heatlhcare cost.

the scammy part is most insurance have DEDUCTIBLE you might reach before covering some of your cost, and OOP, out of pocket maximum where you pay a certain amount each year max, then they will 100% cover all your medical costs. most people dont reach these maximums, so they pay partially or full price for certain things.

this all depends on your INSURANCE you got. dental insurance is not bundled with healthcare insurance, must be bought seperate, and they have thier whole own can of worms to deal with.

Like all insurance it deals with the possibility of a bill so large no savings could cover it. Its like life insurance does not make sense unless you die young assuming you paid into it your whole life. The savings is better right up to the point you get some catastrophic medical issue which could happen in your twenties.

You can do that, and if you're young and healthy it works great if you're disciplined enough not to touch the savings account.

Guess how many people are all three of healthy, young, and disciplined.

Insurance is a scam. But to be fair you can actually have both, with a high deductible HSA compatible insurance plan you get to pay for both insurance you never use as well as put other money aside into an HSA account that earns interest and gains for you. It's a good idea to have an HSA and max it out if possible.

But beyond that I don't disagree with most of your points. It's insane having a system where you're paying thousands of dollars, and worse if you actually do need health care you get the privilege of paying even more thousands of dollars extra until you meet your so called "out-of-pocket' expenses before the insurance provider starts covering things on their own.

With my own health insurance I would actually need to pay out about $12000 (premiums + out-of-pocket) in a given year before the so-called health insurance actually starts covering expenses themselves... and this is assuming they don't decide to deny any treatment and refuse payment. Like sure I guess that's better than paying for a one-off surgery or major health emergency directly.. But I doubt I could afford that every year if I was actually needing regular treatment for an ongoing health issue.