As of May 2014, the number of Americans without health insurance was at an all-time low. Only about 13 percent of adults over 18 didn’t have health coverage, according to a Gallup poll.
With sweeping changes to our health care system, including the Affordable Care Act (ACA), more people are selecting and purchasing health insurance. “New” enrollees include folks who haven’t had coverage for a long time due to cost or having what were previously “disqualifying” pre-existing conditions. (Under the ACA, no one can be denied coverage for a pre-existing condition anymore.) Others are signing up for the first time. According to a New York Times piece, 10 million Americans now have health insurance directly as a result of the ACA.
For those of us with tight budgets, choosing not to have health insurance — in order to avoid having a monthly plan premium to pay — might seem like an acceptable decision. But the money you save in premium payments often doesn’t outweigh the financial risk you face if you have to pay for medical problems on your own.
In our era of rising health care costs, it’s important to understand the total costs of care that can accumulate in a year if you have to cover them yourself without insurance. Costs for identical services can vary dramatically depending on where you go, so you can reduce some expenses by making smart choices like getting blood tests at an independent lab rather than a more costly hospital lab. But without health insurance, you will often be on the “pay more” side of another price difference: Providers can charge you their highest rate, rather than the lower rates that insurers negotiate with them.
As a New York Times article on hospital costs points out, even relatively routine medical procedures can incur unexpectedly high bills. For example, a single overnight stay at a U.S. hospital costs, on average, more than $4,000 without insurance, according to the International Federation of Health Plans. Even just getting stitches can cost upwards of $3,000. A report by health research firm Truven estimates that the cost of having a baby can range between $30,000 and $50,000.
You can see how such costs quickly add up to much more than an insured person pays in premiums and cost-sharing; worse, those uninsured medical costs can easily exceed what the average person can pay at all. In fact, according to WebMD, one out of every four uninsured Americans lose all of their savings to pay for their medical bills. Image may be NSFW.
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No Health Plan: Who Takes the Risk — and Why?
In 2013, a survey of uninsured Americans revealed that 61 percent chose to pass on health insurance because they either lost their job and its group health plan, or simply didn’t feel they could afford it. At the same time, nearly 40 percent of those people had outstanding medical bills — and one-fifth of them reported that those bills caused “serious financial strain.”
For some families, the health insurance decision may feel like a no-win situation. If you pay for a plan, there’s the chance that you won’t use it much, especially if you are generally healthy, and then will feel you “wasted” money. But if you don’t sign up for a plan, you run the risk of acquiring loads of medical debt if you do need care.
However, compare those scenarios side by side and it’s clear that having health insurance provides financial predictability in health care costs, even if it represents a new household expense. Also, remember that some forms of health care are desirable even when you’re healthy, such as the preventive care that helps us to avoid illness or detect problems at an earlier, treatable stage. It’s also good to factor in the value you get from health insurance beyond coverage for medical bills. For example, some health plans, including Highmark’s, offer wellness programs that help members to save money while making healthy changes.
On the other hand, when an individual or household is uninsured, any medical debt can quickly balloon into a financial emergency. While hospitals are required to treat anyone in an emergency, including the uninsured, they will still bill for the care they provide. A 2012 poll by the Henry J. Kaiser Family Foundation revealed that out of all Americans with difficulty paying medical bills, 30 percent were in that position due to lack of insurance.
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Even with all that in mind, young adults in particular (nicknamed the “young invincibles”) may still question whether health insurance is worth the cost, especially if they have a clean medical history. However, accidents and unforeseen illnesses can happen to anyone — and out-of-pocket medical costs can catch people off guard. According to WebMD, 1 out of every 5 adults ages 25 to 44 will be admitted to an emergency room at some point. Nobody, regardless of medical history, is invincible. Going one step further, one article even declared the 18-34 demographic “the biggest winner” of the ACA. Why? In part, because a 21-year-old’s premium under the ACA is about a third of a 64-year-old’s, according to the Kaiser Family Foundation. So getting the medical coverage, financial stability and peace of mind that come with a health plan is, in general, even more affordable for the young.
In our everyday lives, we don’t think twice about hedging risks both large and small. The majority of car airbags never see the light of day, but most of us would never dream of buying a car without one — because the true “cost” of not having one can be fatal. We purchase auto insurance, not just because it’s the law, but because cars represent our livelihood — replacing a totaled car “out of pocket” could easily qualify as a financial disaster. Many people even insure their vacations by purchasing travel insurance.
As important as all of these things are, they pale in comparison to one’s health — without good health, you won’t be able to enjoy that car or vacation. Health insurance, in many ways, ensures your ability to enjoy all the “insurable” parts of your life. (And the uninsurable parts, too!)
Uninsured People May Face Perilous Out-of-Pocket Costs
When you don’t have health insurance, you must pay 100% of your total medical bills out-of-pocket. Uninsured people don’t have deductibles, coinsurance, or copayments — you’re simply on the hook for the cost of every service, consultation, pill, or stitch that you receive. And underestimating these costs — just like underestimating the likelihood of needing health care services — can be financially perilous.
A health insurance plan doesn’t just make it easier and cheaper to receive high-quality health care — it also protects the investments you’ve already made, whether it’s money you’ve put into a retirement plan or money you’re saving for a long-awaited vacation.
As of 2013, the average American was saving less than 5% of their income. If you don’t have savings, medical debt will likely cause an even bigger financial crisis. In fact, a recent Bankrate poll found that 25 percent of Americans have more medical debt than they do emergency savings; 44 percent of those making under $30,000 a year reported that their medical debt exceeds their salary.
Insured vs. Uninsured: The Cost Difference Is Real
If you’ve ever undergone a procedure or received medical care while insured, you’ve probably received an Explanation of Benefits (EOB) from your health insurance company. This document is not a bill. Rather, it details and itemizes the original, “true” cost of your care based on what the provider charges, as well as how much of that cost your health plan will cover.
The sample below shows an EOB for surgical pathology services. Between charges that are non-billable to members (the amount that a provider discounts you for being in-network), the plan’s allowance for covered charges, and the portion paid by the health plan, the patient only has to pay $7 out of the $284 total cost of care. An uninsured individual would be responsible for the entire $284 balance — plus any additional follow-up care. Image may be NSFW.
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For other types of medical care, the difference can be even more stark. Here are some examples illustrating how passing on health insurance can in fact be more expensive than having it:
- Surgery for a broken arm — can cost you $16,000 or more without insurance. With insurance, it can cost under $5,000 to the patient. Potential savings? Around $11,000.
- Emergency room visit — can cost as much as $1,450 without a health plan. With a health plan, they’ll have an estimated $100 to $150 co-payment (there may be other out-of-pocket charges, too, if the plan has a deductible, for example. Potential savings? Around $1,300.
- Wellness checkup with primary care physician — without insurance, that’ll run you around $95 on average, just for the doctor’s time, without tests or other care figured in. With insurance? $23. That amounts to around $70 in savings.
*All cost statistics and comparisons are courtesy of WebMD. These figures are estimates. Costs will vary depending on the patient’s provider charges, health plan and specific services rendered.
Choosing not to have a health plan is akin to driving a car without an airbag, vacationing without traveler’s insurance, or crossing the street without looking both ways. Sure, some people might never need health insurance to cover an accident, injury, or major surgery. But the financial and health-related consequences of an unexpected event (or of managing an expensive chronic condition like type 2 diabetes or asthma) can have a dramatic negative effect on your life and financial wellbeing.
Health insurance doesn’t just protect you from exorbitant medical bills — it protects your child’s college savings, that long-awaited vacation, and even your ability to pay your monthly rent/mortgage and utility bills on time. It provides stability, financial and otherwise. And you can’t afford not to have it.