By Cassandra Mirasolo
While some Americans significantly benefit from having health insurance plans, others choose to remain uninsured. In answering the question of whether or not health insurance is worth purchasing, we must recognize that the response will differ greatly depending on whom we ask.
Examining the individual experiences of various Americans regarding their health insurance plans, and stepping back to consider the systemic impacts of decisions to buy insurance or remain without, tells us that there are many different perspectives. The purpose of this blog post is to break down the costs and benefits of insurance in four different cases and to take a look at the bigger-picture impact of individuals or households remaining uninsured.
Case 1: When Monthly Premiums Exceed the Cost of Paying Per Incident
In 2018, Bloomberg described a family of two in North Carolina who decided that $1,800 a month was too high of a cost to pay for their health insurance. This was the first time in their lives that the family tried to go uninsured.
The wife, 51, was a cancer survivor, while her husband, 48, had high blood pressure and was taking testosterone shots. They reported a yearly income of more than $127,000 with some additional income from property ownership. They were in the top fifth of households by income.
They reported that their insurance premium was $1,691 per month in 2017, which at the time was triple their mortgage payment. In 2018, it went up to $1,813 with a $5,000 per-person deductible.
When a major local hospital also went out of network, it was enough to push them over the edge and off their insurance plan.
Instead of having health insurance, they switched to paying $198 per month for a local doctors’ practice membership and joined a non-profit organization that pools members’ money to help pay for medical care.
Soon after becoming uninsured, an injured knee was the first test of whether the couple had made the right choice for themselves. The husband’s knee required an urgent care visit and X-ray that cost $511, which was still less than what he was paying in premiums.
According to the family, if they can control their health care costs, becoming uninsured makes more sense to them financially.
Case 2: When Fast Access Is a Priority
On its website, MNsure, the Minnesota health insurance marketplace, describes the case of a resident who has pre-existing conditions and has always needed to arrange her life and career in ways that ensure health insurance coverage. In March 2015, she signed up with her first Minnesota health care marketplace plan.
Soon after, in 2016, she had a major health scare, and realizing her health insurance made it easy for her to obtain urgent care from her primary care physician, she was able to resolve her health problem relatively quickly.
Without health insurance, she explains, she would have delayed care “maybe too long” and would have “faced much higher costs and much graver consequences.” She recalls feeling blessed that she had the insurance she needed to seek quick, affordable care.
Case 3: When Costs and Benefits Vary Within a Family
In 2018, a couple in the suburbs of Phoenix, Arizona with an annual income of $55,000 told Bloomberg that they and their son were going uninsured so that the family could save money to cover their daughter, who was born with serious heart defects.
At birth, their daughter qualified for Arizona’s Medicaid program, but when she turned two years old, the family was told they made too much money for her to get low-cost state-level coverage. After a few years, their daughter’s medical costs were well over $1 million, and the family could no longer afford insurance. They lost their house and car because of the crippling payments.
After the Affordable Care Act, the family was able to get a policy for their daughter that was only $217 per month. Coverage for her brother, who is a healthy young boy, would have cost $160 per month with a $6,000 deductible. The couple only insured their daughter, not their son or themselves.
They noted that every single decision is calculated so that their finances do not fall apart. For them, it made sense to only insure their daughter, considering her various medical problems. Coverage for the whole family was not financially possible.
Case 4: When a Chronic Condition Poses a Substantial Financial Burden
On its website, insurer Innovation Health describes the case of a young boy who was complaining to his parents that he did not feel well and began to lose a significant amount of weight. Under his family’s health plan, care was not affordable, and they lost everything trying to pay doctors to find out what was wrong with their son’s health.
Investing in a coordinated care plan facilitated diagnosis of and treatment for a serious case of inflammatory bowel disease. With affordable treatment under his family’s new insurance plan, he gained back his weight, and was put in touch with a social worker who helped to provide financial resources.
For this family, having proper health insurance made two big differences. First, their son was able to get the proper diagnosis and begin the path to proper treatment. Second, their financial burden was alleviated once they found the proper insurance plan for them.
Case 5: The Systemic Consequences of a Split Society
Now that we have examined different case studies at the individual and family level, it is important to note the additional big-picture case of a society split by insurance status. Looking at this case from an economic perspective, we must first understand risk pooling and why it is essential to the health insurance market.
Health insurance risk pools are groups of individuals whose medical costs are merged to calculate premiums. Pooling risks is fundamental to the concept of insurance, specifically health insurance, because it allows the higher costs of the less healthy individuals to be offset by lower costs of the healthiest people. The idea is that the larger the risk pool is, the more stable the premiums can be, which benefits everyone involved, regardless of their health status.
The problem is that healthy, young individuals are not buying into health insurance markets. When this happens, adverse selection occurs, meaning that an insurance market attracts a disproportionate share of unhealthy individuals. Those who need more health care typically end up buying into the insurance market, while those who do not need as much care may choose to remain uninsured, and thus insurance prices go up because fewer people are buying into the market. If instead more people buy into health insurance markets, the cost for everyone decreases, as opposed to leaving a smaller sample with higher monthly premiums.
Negative systemic consequences of a society not fully insured can be improved through increasing membership in risk pools. Those who remain uninsured take an immense amount of risk each day, while less healthy individuals who are the only ones to buy into a system wind up paying higher premiums. Instead of a portion of the population paying $0 without any insurance protection and a portion of the population paying high prices for coverage, the entire population would benefit from everyone being insured while paying lower premiums. This is certainly achievable if we encourage everyone, regardless of their health status, to buy into a program.
Conclusion
Examining different health insurance experiences makes it obvious that, depending on the situation, health insurance may or may not be perceived as beneficial by all individuals.
For some families or individuals, leaving insurance plans may be a better financial move. For others, a marketplace plan can make the difference between recovering from a medical scare or not.
Overall, it is important to understand that perspectives on the costs and benefits of insurance vary significantly depending on whom you ask.
However, for the population as a whole, purchasing health insurance is well worth it. While the obvious advantage of buying in is the comfort of being covered in an unpredictable market, economically, the benefits are also extensive. For example, according to the Urban Institute, a public policy think tank, the benefits of expanding coverage outweigh the costs for additional services. The Institute explains that newly insured people can get more services, beyond what they currently pay for out of pocket or receive in the form of uncompensated care. The Institute states that this can be expected to increase medical spending, but by less than the value of longevity and other potential benefits.
Cassandra Mirasolo is a Decency LLC Summer 2022 intern. She holds a BA in Business Economics from Providence College. She will be a first-year law student at New England Law in Boston, Massachusetts this fall.