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What does "insurance" really ensure?
Drez
Registered User regular
Registered User regular
Insofar as this topic is concerned, consider me an uneducated layman. Feel free to rip my perception apart if I am displaying total ignorance. Also, I'm American. And I'm not just talking about health insurance.
So, insurance - in general - seems like a total clusterfuck to me. The general concept of insurance I have no problem with, but the execution is poor and it feels to me as though the only thing you are ensured of with insurance is that you're going to get screwed over somehow.
First observation: If I need medical assistance but do not have insurance, I will almost definitely be able to get medical assistance. This is regardless of whether I can afford it or not.
Second observation: Having insurance, even expensive insurance, doesn't necessarily ensure all types of coverage, or that all types of coverage will end up with a reasonable amount billed to you. For example, in November my mother who had Stage IV cancer broke her leg. She had leg surgery which went poorly and was stuck in the hospital for about six weeks. She got better but still couldn't walk on it come January. At this point, my father's insurance refused to pay for any more time in the hospital.
The main problem was that my mother was too weak to continue chemotherapy during those six weeks. She was weak from her femur breaking, she was weak from surgery, she was weak from cancer, and her cancer went unchecked for all that time.
My mother was a candidate for aggressive (and expensive) physical therapy, which the insurance company did not want to pay for. She wanted to do it. She was all set - she knew she had to get stronger so she could go back on chemotherapy. Despite all that and despite the hospital recommending her and despite fighting with the insurance company, they would not pay.
So she was discharged, sent home, and her health rapidly deteriorated from there. We tried, but we couldn't give her the same level of care the hospital did or the aggressive physical therapy would have. She had visiting nurses and a physical therapist, but it didn't help. A month later, she was dead.
I can't help but wonder if my mother would still be alive now if she has been able to do the aggressive physical therapy. Maybe not, I cannot say, but I think OT was worth a shot and so did the hospital and the physical therapist from the program who examined her. The only person that got in the way was the insurance company. Isn't insurance supposed to ensure that things like this don't happen?
My personal woes aside, I feel the same way about car insurance. I don't know one person that has even been mildly happy with their insurance experiences after a collision or theft. Most collisions seem to not exceed the deductible.
I dunno, "insurance" just seems like a big scam to me. Ensure what? To who? I admit I am personally still pissed about my mom's situation, but this was inspired by something in chat where someone said they were paying $1400 a month or something which is ludicrous.
So, insurance - in general - seems like a total clusterfuck to me. The general concept of insurance I have no problem with, but the execution is poor and it feels to me as though the only thing you are ensured of with insurance is that you're going to get screwed over somehow.
First observation: If I need medical assistance but do not have insurance, I will almost definitely be able to get medical assistance. This is regardless of whether I can afford it or not.
Second observation: Having insurance, even expensive insurance, doesn't necessarily ensure all types of coverage, or that all types of coverage will end up with a reasonable amount billed to you. For example, in November my mother who had Stage IV cancer broke her leg. She had leg surgery which went poorly and was stuck in the hospital for about six weeks. She got better but still couldn't walk on it come January. At this point, my father's insurance refused to pay for any more time in the hospital.
The main problem was that my mother was too weak to continue chemotherapy during those six weeks. She was weak from her femur breaking, she was weak from surgery, she was weak from cancer, and her cancer went unchecked for all that time.
My mother was a candidate for aggressive (and expensive) physical therapy, which the insurance company did not want to pay for. She wanted to do it. She was all set - she knew she had to get stronger so she could go back on chemotherapy. Despite all that and despite the hospital recommending her and despite fighting with the insurance company, they would not pay.
So she was discharged, sent home, and her health rapidly deteriorated from there. We tried, but we couldn't give her the same level of care the hospital did or the aggressive physical therapy would have. She had visiting nurses and a physical therapist, but it didn't help. A month later, she was dead.
I can't help but wonder if my mother would still be alive now if she has been able to do the aggressive physical therapy. Maybe not, I cannot say, but I think OT was worth a shot and so did the hospital and the physical therapist from the program who examined her. The only person that got in the way was the insurance company. Isn't insurance supposed to ensure that things like this don't happen?
My personal woes aside, I feel the same way about car insurance. I don't know one person that has even been mildly happy with their insurance experiences after a collision or theft. Most collisions seem to not exceed the deductible.
I dunno, "insurance" just seems like a big scam to me. Ensure what? To who? I admit I am personally still pissed about my mom's situation, but this was inspired by something in chat where someone said they were paying $1400 a month or something which is ludicrous.
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Sorry for your loss.
Basically it's to ensure that a catostrophic accident doesn't occure. So you pay $20 a month because even if you get in an accident tomorrow for $20,000 that's still you just paying $20 a month.
Though, the point of the matter is when you're dropping $1400 a month for partial healthcare, that's really silly. You're better off plopping that money in a fucking jar on your desk. For someone young and healthy, the chances are you won't get in trouble before it's accumulated to massive amounts. Even if you did, I don't know of many doctors or hospitals that won't take $1000+ a month as a valid payment.
No, we can talk about all kinds of insurance here if desired.
I wouldn't say that it is calculated to fuck the consumer, I'd say it is calculated to protect the insurer.
Insurance is a business in America, first and foremost. And untill recently only Government Regulated, not provided. The goal of ANY business is to make money. So how do you make money in a business that pays a person when that person has an accident? Well, you have to have a large base of people that pay into the system and hope they never take out of the system. This also means having to deny people that are definately going to be taking out far more than they put in.
It works very well with Material Possession Insurance. It works very shittily in Personal [Health] Insurance.
Health insurance begins to break down because costs aren't nearly as predictable, and can be super-expensive. Also it doesn't necessarily have guaranteed results; with a car you can just buy a new one with the insurance money. Can't get a new body (yet). There are plenty of people who can better explain the flaws of the privatized health care system than I can, but it is a mess.
Any rate, sorry for your loss. I know it is tough, going through something like that, and it is easy to feel that the system has badly served you. Probably because it did.
Like if I need to cover more for an xray, or, if I need to have a tire replaced because someone knifed it but don't want my insurance premiums to skyrocket.
Obviously I haven't thought that threw, but it'd be a neat idea.
This gives two options: deny insurers the right to underwrite their risks, through regulations that compel them to accept all applicants regardless of history, or effectively deny a good proportion of the population access to affordable health coverage. With a large enough pool, this evens out, as long as there's no adverse risk selection (eg, if you're the only person taking no histories, then your costs increase, people with good histories go to other cheaper insurers and all you get is people with expensive histories). Realistically, this is best achieved by social systems, not commercial ones (as there is little opportunity for competition in such a marketplace).
I don't really have a problem with insurance, but then again, I live in socialist commu-nazi dreamland and all I gotta pay for healthcare is 20-30€ yearly healthcare clinic bill, and that's only if I use their services.
Doesn't the rest of your post negate that observation? You might be able to get emergency care, but best of luck getting long-term medical assistance or procedures without any way of paying for it.
I'm assuming the guy planned ahead and had some kind of term life on himself. So his family got idk $500k to pay off their house and support the kids etc.
She got sued for wrongful death and lost(obviously) and the judgement was set at $1m dollars. Her liability insurance covered all of that. A million dollar judgement against you when your 18 is a debt you will never pay off(default judgement interest is 12%, even if a bank would loan you at 3% that still 30k a year in interest alone). Now the interesting side question is if her liability insurance had only been up to 500k, 750k ect, would it have still been a 1 million dollar judgement. I kind of doubt it.
they don't consider what your insurance coverage is when setting judgments. So if her insurance had only been 500k, she'd have been on the hook for the other half. Of course, she would have probably had to declare bankruptcy, some judgments are discharged (others aren't, like ones for drunk driving and child support).
Thats a flex account, similar but different. I have an HSA, and its basically just a special checking account(I should really move most of into an investment account of some kind). I get to put in $ tax free, and just store it up till I need it. I figure sometime in the next couple of years I'll go get lasic. Using HSA money will be basically like getting a 25% discount on the procedure.
Sounds like a Health Spending Account rather than a Health Savings Account.
I know I can withdraw money from mine with a check for anything I want. Of course I pay the premium on that (30%) but it is handy having oh shit money above and beyond my actual oh shit money that I can pull on if I need it. For instance, if I have two oh shits.
Basically this. Insurance is the only industry I can think of whose entire profit model is based on not providing you the services you're paying for. And not just in the case of, "Well, you paid your premiums for X years but never needed to make a claim, so those $Premiums are ours to keep," but -- "Fuck no, we're not paying out your claim" proceeding all the way down the line to Recission practices which are essentially "Paying your claim would cost more than refunding all the Premiums you ever paid, and you forgot to cross two t's on your application so you never had insurance with us, here's your $Premiums back, good luck with that quadruple bypass."
Works great when you're insuring a loss against something tangible like a car, house, apartment, etc. The worst that could happen is that your claim is denied and you lose that property (or have to pay out of pocket for a replacement). Works terrible when the item at stake is your life and health, where the worst that could happen is you die, or watch it happen to someone you love, or go into crippling debt for the rest of your days. You can't pay out of pocket for a replacement life. Major life-threatening injuries/diseases with long hospital stays can easily reach or exceed the cost of a house, which for most people is the most expensive thing they'll ever have to pay for.
Sorry about your mom, Drez.
Well, part of the problem here is that health insurance isn't a good example of what insurance is supposed to do, because of issues of utilization.
Let's look at something a little bit more reasonable, like home insurance. Only a small minority of people are going to ever lose their homes in a fire. Most people never will. But you don't know if you will or not - so when you own a home, there is a small risk of losing that home to a fire.
Instead of all homeowners saving up the replacement costs of their homes, each individual homeowner can pay a relatively small premium. In an ideal situation, the total amount of money that each homeowner pays in premiums is less than the replacement value of their home - otherwise, it would just make more sense to put that money in a savings account somewhere.
Health insurance doesn't really fit this model. You're not protecting against a single, rare, catastrophic accident; you're covering routine checkups and prescriptions and diagnostics as well. People who have health insurance want to maximize their value, so they will choose to utilize it more - go to the doctor more often, get more expensive prescriptions, opt for elective or semi-elective surgeries, etc.
This means that there is less "float" - less opportunity for the insurance company to save and invest the money they collect from premiums before they have to pay it out in claims.
Consequently, health insurance companies have to fudge the insurance business model a little bit. Instead of distributing risk, they're distributing the burdens of utilization. They're hoping that enough healthy people get signed up - generally, through their employers' big group plans - to cover the high utilizers.
All insurance companies have an interest in preventing the payout of claims, but for other types of insurance, as long as they're managing their risk appropriately, their business model doesn't rely on it. With health insurance, their business model requires that they have a steady population of low utilizers, so they have a much greater interest in keeping utilization low.
the "no true scotch man" fallacy.
http://www.fivecentnickel.com/2010/02/22/using-your-hsa-as-a-retirement-investment-vehicle/
Pretty slick really. I think I may be upping my monthly contributions to my HSA.
It's a little less confusing if you refer to the former as a flex account.
And, yeah, I fucking hate flex accounts. My experiences with them have been horrible.
Health savings accounts aren't remotely so bad, but I still find them a little awkward.
the "no true scotch man" fallacy.
It also means that it is in the insurer's best interest to pay out on as few filed claims as possible for those people to whom they do provide insurance, and to pay out as little as possible on any claims which are accepted. Which puts the insured in a position of simultaneously dealing with the loss/damage of his stuff (for material posession insurance), the hassle of dealing with the companies who can replace/repair his stuff (who are individually trying to make as much from him from the service as possible) and the insurer whom he's been paying for however long on the basis that, in an emergency, they'd have his back but, in fact, are doing everything they can to avoid having his back.
I would wager that insurance doesn't work any better, on average, for material posessions than for health. It's just not as obvious because when the insurer refuses to pay to have your car repaired or the roof put back on your house or whatever nobody's dead because of it.
Yup, I'm eligible to invest it like that now. Its kind of neat really, but right now I'm using it as my oh shit account because as a young kid you tend to have lots of shits that oh from time to time all at once, and don't have decades of saving to help offset it.
IMO they're all stupid clumsy awkward confusing workarounds to having real single payer.
But that's just me because I'm a bleeding heart pinko.
Edit: I liked my travel flex spending account. That was super-easy to deal with and pretty nice. I didn't have the same problems as I did with my healthcare flex spending accounts.
the "no true scotch man" fallacy.
Which, sadly, means that in the final balance the consumer is often left up shit creek without a paddle. Hence why something like 50% of bankruptcies in the US are from medical costs, and of those 75% had insurance
Actually, if you're young and healthy and have a decent income and low medical expenses, it's a great idea. Because then you get another account to put pre-tax income into that will gain interest until you need it.
the "no true scotch man" fallacy.
Its a much easier sell though, since everyone who is taking advantage of them is working. Helping a worker pay their bills is harder to attack than a 'give away' to everyone(minorities).
Also, all the weird kind of accounts work better for older people who have more steady yearly medical costs. If you know you are going to spend at least $30 a week on drugs, theres not much risk putting $2k in a flex account.
Using your HSA to purchase $100 worth of services:
Cost $100
Using your post tax income to purchase $100 worth of services assuming a salary of $100,000 (for easy math)
Cost $100, but on $100 I had to pay the following in taxes.
$4.20 SS
$21.03 Federal
$1.45 Medicare
$5.99 state (NY)
I mean if you're baller enough to be able to afford to max out your 401K and your HSA and really want to save as much for retirement as possible, sure it's a good idea. But for most folks it's shit.
As for writing off medical expenses from your taxes, Im pretty sure that only applies to your federal taxes, not payroll and probably not your state. Also, you would lose your standard deduction and would need to exceed a decent chunk of your income.*
Source: An accountant half caring about my question (Can you deduct medical expenses? Why did I not do this?) so this could be wrong or half-right.
Someone making $100,000 might be able to beat the std. deduction though.
In principle, most insurers aim to pay out in claims and operating costs in a given period almost exactly what they are paid in premiums. If more premium is paid in than expenses are paid out it's usually a sign that insurer's underwriting model is wonky, because they could have been charging less for their premiums.
Insurance companies tend to make their money by investing the capital they have available to them between the premium being paid and claims being paid out. How profitable this is depends how much money is available, which depends on the volume of customers. It is almost always better to attract more customers (up to a given threshold of risk) than attract fewer and charge them more.
For what it's worth from my perspective the Insurance industry in the US seems to be appallingly poorly regulated, when it's regulated at all in any meaningful sense.
Most of us are risk averse. That means we'd rather spend $100/month for sure, then run a 1/1000 change of losing $100,000 every month. Therefore a business can pool our monthly $100, pay out the losers, earn profit off the float, and everyone involved (customers, losers, business) is better off.
The downside that we live in a world of incomplete information and contracts. So every form of insurance is saddled with two problems. Adverse selection and moral hazard. Adverse selection refers to us knowing more about our risk of being a loser than the business. If the risks are different enough only worse risks will buy insurance, causing premiums to rise, which causes more drop outs, causing premiums to rise further. In the end, insurance is only availably to those who face the steepest risk of needing it. It becomes a bad deal for low risk individuals.
Moral hazard means that once a contract is written we have a principal agent problem. One person decides, the other pays. From the customer side, I will now use insurance to pay for things I would not choose to pay for myself even if I had the money. From the business side, I will now try to not pay for things even if the customer would have chosen to pay for (and therefore insure) them.
tl;dr: Insurance is always structurally fucked. But it's still worth it.
You would only use your HSA as an investment account if you didn't have medical expenses.
Otherwise, it's just a backwards way of making your medical costs tax-free.
Medical expenses are "above the line" deductions, so you can still have your standard deduction... but you can only write off medical expenses over 7.5% of your adjusted gross income.
the "no true scotch man" fallacy.