Why I like my health insurance

Kim Morris | June 11, 2009

Apparently my household is exactly "average" in terms of our health care spending, although I would not presume to imply that we're anything resembling "normal" in any other manner of life! But that's a different topic. This post is simply about why I like my health insurance plan.

We have a Health Savings Account plan with a $6,800 family deductible. I pray that we do not ever meet the $6,800 - that would almost certainly be a tough time for our family. It's not the money so much as the thought of us being so sick or injured as to need that significant amount of care. Of course it could happen at any time. A couple of broken bones; any surgery; even an extended out-patient treatment would put us over the deductible. But it hasn't happened yet and I'm glad.

So far as we approach mid-year we've managed to pile up about $1,500 in out-of-pocket medical costs applied to our large deductible. I've written the checks for most of these bills myself (my spouse paid the rest), so I know it hasn't been easy. But apparently these costs are perfectly normal, statistically putting us squarely in the median of American households.

Our relatively healthy family history means that we pay our $800+ per month premium to our insurer with absolutely nothing in return right? (Ouch, it even hurts to write that sentence). Well, not exactly.

Today I reviewed a lab test bill from a large national lab. (You probably know the name but I'm not listing it here). The bill was $286 for blood tests at my recent physical exam. This expense was in addition to the $110 charged by my physician - All money well spent, IMO, to hear that I am healthy.

While reviewing the Q bill, I noticed that my health insurance has discount arrangements with the lab that knocked my expense down to $65. That's $286 to $65. I remembered that the health plan's Preferred Provider discounts on our other medical bills that I already paid were similarly gigantic. The insurer's discount saved me over $200 on this one bill alone. There have been many more bills and with our always active family, I expect more will follow in the second half of 2009. So I took the math a step farther; if we wind up paying a total of $3,000 over the course of the year and the Preferred Provider discounts are similar proportion, what would the total bills be without insurance?

The calculator says $13,200. (286/65*3000). Without our health insurance plan, our healthy family would have to spend $13,200 on a good year without any major medical problems!  Imagine how much worse it could be if one of us has a serious health problem.

Continuing with the math, I see that our total projected health costs for the year - premiums paid plus deductible are presumed to be $12,600 ($800 x 12 + $3000). Compare that to the presumed cost of $13,200, we could make the argument that even for a healthy family like ours with mostly preventative care and mild treatment expenses, it is cheaper to have health insurance than not have it. If my assumptions play out, then our health insurance is saving a net of $600 this year.  Now I know there are people who assume that insurance is supposed to return more than the premiums paid, but I know this is a silly perception. Of course insurance must collect more in premiums than it pays in benefits. But if the health plan can earn its keep by providing member discounts, I am just as happy with that. It's all green cash.  My analysis here is overly simplistic but it does make the point intended.

The next questions that come to mind are 1) whether we could get these provider discounts without our health insurance, and 2) all considered, is $12,600 a reasonable amount for a typical household like ours to be paying for health care? Both issues must wait for another blog post.

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