To Insure or Not To Insure? That is the Question!

We are reaching the tipping point where, for most individuals and for most businesses, it is better to have no coverage and to pay cash than to have health insurance.

For 2018, it is looking like a family will have to pay, when you include the insurance policy costs, about $30,000 before the insurance kicks in. Yes, any insured person, when they pay cash, will have the benefits of the reduced rates negotiated by your insurance company; but these days you can get that yourself.[1]

Cash is always king. In New York City, if you go to an Urgent Care Facility and pay cash, the cost is $125. If you submit your insurance, after Blue Shield pays its part, you will get a bill for $175. In California, if you have an epidural for you back, even after you have met your deductible you still must pay. Doctors visits will cost you $75, each, for your before and after visits. Then there are the surgical costs, $265 out of pocket representing for your 30% of the cost of using an in-network anesthesiologist, plus 30% of the surgeons cost, plus 30% of the facility cost. This works out to about $1500, out of pocket. If you pay cash, the same procedure with the same doctor will generally run about $850, all in.

For the average American, if they have no insurance and pay cash for their procedures, it will cost them less out of pocket than if they have insurance. For it to be worth it to purchase insurance, a purchaser would have to spend at least $22,500, cash, to pay for the portion of their healthcare dollars that would be paid for by their insurer. But even at that number, they still would be out of pocket; breakeven will still require the purchaser to pay more out of pocket than that. Worse, for the average American, when they really get sick, even with insurance, they are likely to quickly descend into the levels of poverty that make them eligible for Medicaid. Once on Medicaid, the need for health insurance goes away. They are paying something for nothing because Medicaid covers all their costs and they pay nothing.

Even better, cash payers have access to everyone. Doctors, hospitals, labs, therapists, all love cash. It saves them significant administrative costs. They get paid faster; and, they know they will get paid. No one turns away a cash pay customer. Cash pay patients are not subject to narrow networks; they get immediate appointments; and are not constrained by insurance company restrictions on treatments, testing, and medical care.

While most people eligible for subsidized care are subject to some form of exemption from the fine for not having insurance, the fine is relatively small when compared to the cost of insurance. If you earn $50,000 per year the fine is the greater of 2.5% of household income capped at the total yearly premium for the national average price of a Bronze plan sold through the Marketplace or a maximum fine of $2,085 maximum calculated $695 per adult family member plus a fine of $347.50 per child under 18 .

If you fail to pay the fee, the IRS will hold back the amount of the fee from any future tax refunds. If you arent entitled to a refund, they cannot go after you. There are no liens, levies, or criminal penalties for failing to pay the fee.

For businesses, the picture is even more bleak. Costs are going up so significantly, that there is a move to self-insure. The problem with this is that most licensed TPAs (Third Party Administrators) are also health insurance companies. As a result, the insurance companies still charge burdensome administrative fees, so very little savings are realized even though the insurance company no longer bears any of the risk. MEWAs and Christian gifting programs provide some relief; but have not been widely adopted.

Bottom line, even if you are getting subsidized care, you might be better off without health insurance.

[1] A family plan will cost $20,000; the deductible will be $10,000, co-pays for all services, including wellness will be $45 to $75 per visit with co-pays not counting towards the deductibles. Worse, the plans are generally 70-30 plans, which means that the insureds are responsible for 30% of all bills. Based on this arrangement, you are going to need to cover $30,000 worth of bills before you get started. The only thing an insurance company is providing for you is the negotiated rate; which, if you pay cash, you can get on your own.