As noted in past articles, I’ve had a pretty cozy health insurance situation up to this point. Growing up in Canada, I was blissfully unaware of the issue, since like virtually all other rich nations, that country provides universal healthcare for all citizens. I took advantage of that system for exactly two major health events: being born in the early 1970s, and a broken ankle after a bike accident in the late 1990s. Both times, the hospital got the job done well.
Moving to the United States, I found the choice of employer-offered health insurance plans confusing, so I just went with the cheapest one. Occasional gaps in coverage occurred as I hopped between employers throughout the early 2000s, but I didn’t notice since I was fortunate enough to have no occasion to visit a doctor during those years.
Then early retirement came and my wife was kind enough to throw me under the umbrella of coverage offered by her part-time employer for the last five years. Although I was grateful, I was not able to take advantage of the insurance outside of an annual visit to the doctor for a checkup. But it did help out greatly by paying most of the bill for the hospital birth of our son.
At last, she quit her part-time job, the free insurance ended, and we were forced to think for ourselves earlier this fall. So all of the health history above went into deciding how to cover ourselves for the rest of our adult lives, during which we will probably never be conventionally employed again.
The thing about insurance is that it is best enjoyed as a game of numbers and probabilities – not feared as a nightmare of imagined outcomes. As I noted long ago in Insurance: A tax on people who are bad at math?, there are only two situations in which I buy insurance:
Health insurance is different: medical care is expensive in the US, with lifetime costs for major conditions potentially reaching to a million dollars or more. On top of that, my young son is a wild card who is more likely than me to injure himself while playing, and I still have the slightly dangerous hobbies of mountain biking and snowboarding. We may even be slightly riskier than the insurance company estimates, making the choice to buy health insurance a positive one.
The next step was looking at our own health care spending over the 13 years we’ve lived in the US:
Moving to the United States, I found the choice of employer-offered health insurance plans confusing, so I just went with the cheapest one. Occasional gaps in coverage occurred as I hopped between employers throughout the early 2000s, but I didn’t notice since I was fortunate enough to have no occasion to visit a doctor during those years.Then early retirement came and my wife was kind enough to throw me under the umbrella of coverage offered by her part-time employer for the last five years. Although I was grateful, I was not able to take advantage of the insurance outside of an annual visit to the doctor for a checkup. But it did help out greatly by paying most of the bill for the hospital birth of our son.
At last, she quit her part-time job, the free insurance ended, and we were forced to think for ourselves earlier this fall. So all of the health history above went into deciding how to cover ourselves for the rest of our adult lives, during which we will probably never be conventionally employed again.
The thing about insurance is that it is best enjoyed as a game of numbers and probabilities – not feared as a nightmare of imagined outcomes. As I noted long ago in Insurance: A tax on people who are bad at math?, there are only two situations in which I buy insurance:
- If I am significantly riskier than the insurance company thinks I am, or
- If the consequences of being uninsured would be too disastrous for me to handle, yet still have a reasonable chance of occurring
Health insurance is different: medical care is expensive in the US, with lifetime costs for major conditions potentially reaching to a million dollars or more. On top of that, my young son is a wild card who is more likely than me to injure himself while playing, and I still have the slightly dangerous hobbies of mountain biking and snowboarding. We may even be slightly riskier than the insurance company estimates, making the choice to buy health insurance a positive one.
The next step was looking at our own health care spending over the 13 years we’ve lived in the US:
- From 1999-2005, costs were negligible: less than one check-up per year each, with no treatments or prescriptions. They were covered by insurance, but even if paid out of pocket, this would have averaged to under $200 per year.
- In 2006, the birth of the boy and related issues racked up a bill of about $20,000 (a routine surgical intervention was needed, quadrupling the cost), $4,500 of which we had to pay ourselves.
- From 2006 to the present, we have averaged one doctor checkup each per year, plus one antibiotic prescription per year between us, which if paid out of pocket would have cost about $600 per year.
Total medical spending (mostly covered by insurance): about $25,000
Total premiums paid by from employers to insurance companies on our behalf: about $100,000
Hey, there’s an unexpected result! We took a 12-year period which included the once-in-a-lifetime (for us) event of a hospital birth of a baby with added surgery, and it still ended up that the insurance premiums were about four times higher than the insurance benefits. This told me that I should probably shop carefully for insurance, in order to get something that protects me from those million-dollar illnesses, but does not attempt to pay for any hundred-dollar incidents, since the cost for that extra protection is clearly very high.
The next stop was an insurance comparison engine. We used ehealthinsurance.com* to do this search, which allowed me to see offerings from the companies that compete specifically in my area – sorted by price. I was pleased to note that prices drop rapidly as the annual deductible rises – meaning most health care expenses are statistically the lower cost ones, and the million-dollar illnesses are indeed very rare (otherwise the premiums would be different).
The winning plan for us was one called the “Saver80 United Health One” plan from United Healthcare, with a quoted price of $219/month** for the family (two 38-year-old adults and a 6-year old boy). The price is low because it comes with a relatively whopping $10,000 per-person/ $20k-per-family deductible, meaning we are very unlikely to ever use this coverage. But at the same time, covering $10-20k in the event of a catastrophe would not be a significant hardship for us, especially given that this is an unlikely event. Even if the expense were to reoccur annually for decades, we could adjust our lifestyle as needed, or earn more income, or get a job with insurance coverage, or make any number of other changes – assuming we even survived that long with such a serious condition. So it passes the test of putting a safe cap on expenses.
All plans these days also provide one free checkup (or “annual physical”) doctor visit per year, with no copay or deductible at all. The value of this alone is worth 10-15% of the annual premium of our new plan.
Total premiums paid by from employers to insurance companies on our behalf: about $100,000
Hey, there’s an unexpected result! We took a 12-year period which included the once-in-a-lifetime (for us) event of a hospital birth of a baby with added surgery, and it still ended up that the insurance premiums were about four times higher than the insurance benefits. This told me that I should probably shop carefully for insurance, in order to get something that protects me from those million-dollar illnesses, but does not attempt to pay for any hundred-dollar incidents, since the cost for that extra protection is clearly very high.
The next stop was an insurance comparison engine. We used ehealthinsurance.com* to do this search, which allowed me to see offerings from the companies that compete specifically in my area – sorted by price. I was pleased to note that prices drop rapidly as the annual deductible rises – meaning most health care expenses are statistically the lower cost ones, and the million-dollar illnesses are indeed very rare (otherwise the premiums would be different).
The winning plan for us was one called the “Saver80 United Health One” plan from United Healthcare, with a quoted price of $219/month** for the family (two 38-year-old adults and a 6-year old boy). The price is low because it comes with a relatively whopping $10,000 per-person/ $20k-per-family deductible, meaning we are very unlikely to ever use this coverage. But at the same time, covering $10-20k in the event of a catastrophe would not be a significant hardship for us, especially given that this is an unlikely event. Even if the expense were to reoccur annually for decades, we could adjust our lifestyle as needed, or earn more income, or get a job with insurance coverage, or make any number of other changes – assuming we even survived that long with such a serious condition. So it passes the test of putting a safe cap on expenses.
All plans these days also provide one free checkup (or “annual physical”) doctor visit per year, with no copay or deductible at all. The value of this alone is worth 10-15% of the annual premium of our new plan.
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