Analyzing the Realities of Health Insurance, a Part Two of Sorts

I found health insurance for a reasonable price: $80 / month. It’s still quite high, considering that at $80 / month for the next 20 years I would need to rack up $19,200 worth of medical bills to break even. If I were to invest $80 / month into a savings account with just 2% interest, I’d end up with nearly $24,000. But I digress.

For $80 / month the insurance will cover things like doctor visits, eye exams, trips to the dentist and give me discounts on prescriptions. In that regard, it’s a typical insurance plan and seems pretty decent.

For hospital stays, emergency room visits and the like, they’ll cover up to 40%. I was blessed recently with the opportunity to be hospitalized due to failure of the appendix to work (and be necessary). So I have a real life example we can all work from.

First off, a trip to the ER which results in surgery and a hospital stay can be quite confusing. The hospital bills you for the bed and drugs you use while in the hospital, and separately for the ER experience. Additionally, each “specialist” charges you individually as well: a radiologist sends you a bill, a pathologist sends you a bill, everyone who so much as looked at you during your experience will send you a separate bill. This is frustrating because if you have trouble paying, you know, because you don’t have insurance, then you can end up with four or five blemishes on your credit record, rather than just one big one. But I digress…

Another little known and baffling fact is that since I had no insurance, I received a 50% discount on my entire bill. I’m still not 100% sure what the total of that bill is — I’m still trying to sort out all of the different charges from the various suppliers — but it looks like it would have been around $40,000 total. That’s an immediate $20,000 they just knocked off of my bill. Now, before you go thinking “wow, that was nice of them” realize that if they’re actually charging the insurance companies the $40,000 instead of the discounted price, then that’s a big contributor to why health insurance is so damned expensive. I’m sure there are other factors, the likelihood of the insurance co.’s getting some discount too, but it all wreaks of a scam.

Okay, so what we’re left with is this simple fact: Were I to have had that $80 / month insurance, my bill would have actually been higher!

Here’s the math:

With Insurance: $40,000 (total bill) – 40% (insurance payout) = $24,000 (my responsibility)

Without Insurance: $40,000 (total bill) – 50% (hospital discount for people w/o insurance) = $20,000 (my responsibility)

Final equation: insurance = scam.

Up Next: Betting Against Your Own Health