I’m Young, I’m Healthy, I Don’t Need This Stuff – And Why This is STUPID

If you’ve ever caught yourself saying anything remotely like that this is your reality check.

Truth is, there are people who do not need the warranty portion of health insurance. There are a rare few (Bill Gates comes immediately to mind) who do not need the health insurance at all. But the reason they don’t need health warranty and/or insurance has zero to do with their health and everything to do with their bank accounts.

And for today’s discussion, we are officially ignoring the ACA and the tax penalty. But when you do your own math, don’t forget – 2.5% on your income is 2.5% more than you want to have to pay to the IRS.

Here’s the thing – health insurance DOESN’T protect your health. It protects your wealth. Strictly speaking, the insurance coverage pays so your wallet doesn’t have to. Now, yes, there are those whose wealth is so low that they need health insurance (the warranty portion) in order to secure good access to care – but that’s an add on. What you are really insuring is that you stay out of bankruptcy – not that you stay healthy.

So, what do I mean by warranty? First off, this is my term – it’s not health insurance jargon – although it probably should be. Look at other forms of insurance – does your car insurance pay for repairs when your car has a mechanical issue? No – but the warranty (if still in effect) does. Same thing with home owner’s insurance. Water heater bursts – you pay (unless you have a warranty). House burns down – they pay.

Only health insurance embeds the warranty into the plan. This is the doctor’s office visit, the drug coverage, the preventative care – all the things that pay for things that aren’t related to an accident, act of God or other, unforeseeable circumstance. There is some bleed over, obviously – if you find that you have cancer then drug coverage is definitely on the insurance side – but if you just need an antibiotic for the bacterial infection you got, that’s warranty (no one is so healthy that they won’t have any health issues at all – think of it as being like wear and tear on a car – only it’s wear and tear on you!).

The reason I mention all that is that it’s the reason we get so confused about our health insurance needs. Healthy people who rarely visit the doctor and who are not in dire straights financially don’t really need a plan that allows two office visits before coinsurance – they are unlikely to use them and could afford to pay for a visit if they did need one. People with severe financial issues DO need the warranty portion, however. A twisted ankle that is too painful to stand on can prevent someone in retail or restaurant work from working – and from getting paid if they don’t have sick pay, vacation or enough of either.

For the working poor, there is no real distinction between the warranty and the insurance – they are effectively the same. These are the folks that most need to make sure they get the most possible coverage and the best possible coverage out of their health insurance. They are the reason tax credits exist – and for them an extra $25 a month might be a pinch but may also be a good investment, especially if they don’t have leave time to be off work.

For the middle class, the distinction can be made and may even matter – paying an extra $100 each month for the warranty isn’t justified if you are only going to the doctor once and can afford to pay $200 for the visit. That person is better off banking the $1200 in their HSA (Health Savings Account) and paying the $200 out of pocket. Notice that I didn’t say spend the extra $1000 on a boat – just because you’re pretty healthy does not mean you should be stupid about your future or reckless with your health money.

For the rich, it’s a numbers game. Just because you can afford to pay everything out of pocket does not mean you should – insurance is a form of investment that minimizes the financial exposure of a serious accident or illness. Gold or even platinum plans can be good deals for even healthy rich folks – and they do well to get input from both a broker and an accountant to get the most out of the investment. But they can also safely buy the cheapest plan out there, and pay what little they do use out of pocket – the insurance being there to stop the financial bleeding if something bad happens.

Insurance protects your wallet – not you. No matter how many platinum health plans you buy or how many insurance cards you have tucked in your wallet you can still get hurt or sick. Maybe you jump out of a perfectly good aircraft – maybe the other driver is too busy texting to watch the road – either way, that busted leg is still busted despite the lovely plastic card in your wallet. But having that lovely piece of plastic may be the difference between putting off buying the new boat for a while and having to sell both the boat and house to pay your hospital bills.

How healthy you are doesn’t matter for deciding if you need a health insurance plan – how healthy is your wallet?

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