Is It Crazy To Forgo Health Insurance?


Bloomberg posted an article that explores the idea of people choosing to forgo health insurance taking the risk that nothing serious will happen and that they will be better off paying for things like checkups and minor ailments out of pocket than paying the combination of monthly premiums and high deductibles. The article also touched on health insurance alternatives like faith-based coverages and subscriptions that some doctor offices offer.

For the last year or two I have had insurance through my side gig at AdvisorShares. Before then I was buying insurance directly and every year I chronicled the extent to which my premiums were going up, I started doing this before ACA was enacted. The last year that I was buying my own insurance through the market place our premium was a little over $1300/mo or $15,600 for the year. Thankfully nothing serious ever happened but the deductible would have been $7000 each that last year. The upside was the total out of pocket would have been $25,000 and we could fund our HSA.

Quick side-bar, HSAs might be the greatest financial creation ever at least they should be the first choice for savings vehicles unless you have access to a 401k that matches your contribution. Get the match and then fund your HSA will be the best advice for almost everyone.

I shared the article on Facebook and several friends commented. One friend said a broken ankle cost $20,000 and he was grateful for the insurance. His injury was actually quite a while ago so insurance is a much different thing these days but the math isn't so great using his story. $15,000 for insurance and a $7000 deductible to cover the ankle and one annual checkup and you're worse off. Obviously that would only be knowable in hindsight but I do think it is rather startling.

In another comment, a friend noted their family's premium being $3000/mo. They have an extenuating medical circumstance but how many people have their own extenuating medical circumstance, my friend is fortunate for being able to afford the $3000. $3000 is more than double the mortgage I pay on our house. Framed that way, a health insurance premium being more than a mortgage payment is pretty insane.

Politically speaking I think Obama broke it and now the GOP has no clue how to fix it.

In terms of forgoing health insurance it is clearly a risky proposition and I would hope the risk is obvious; if something big/bad comes along it would likely be financially ruinous. And the scenario I would lay out for forgoing insurance assumes no children in the equation, assuming someone can afford the payment I would never advise not insuring children but the article addresses a case where a family had to for financial reasons.

A scenario where forgoing health insurance could work as a somewhat mitigated risk could be for people in their early or mid-50's who are very fit and have no medical issues. After getting a clean bill of health from an annual checkup they cancel their insurance for 18-24 months saving the (maybe) $1300/mo then re insure until Medicare. Someone who retires at 50 or 55, or is self-employed in that range, is looking at 10-15 years of insanely expensive insurance. Carving out two of those 10-15 years is financially appealing. This person could also repeat this one more time before Medicare eligibility.

There's no pushback on this being very risky but if/when premiums are no longer feasible, this is an option for healthy people without much family history of serious problems. I would also urge anyone to take the time to learn about alternative forms of coverage like faith based, for some folks it can be the answer.

Kind of related, have you seen the commercials for the Wag App, the dog walking service? A quick Google search says that dog walkers hired by the app make $17.50 per walk. I look at this as getting paid to exercise. In the right circumstance (fit, like dogs, live where there are enough people who might use the app) it could be a modest income that, again, pays you to exercise.