I am a partner in a law firm. I have a wife and two kids. I pay 100% of my health insurance premiums. I have a high deductible family plan, which I couple with a tax-deductible health savings account. My family has never reached the deductible in any year — this is good, because it means that we haven’t been very sick. It also means that my family has been paying for its own health care out of the HSA, with pre-tax dollars.
So why do we have health insurance? The obvious answer is that if (when) one of us gets really sick, we will blow through the deductible, and the insurer will (I hope) pay claims. The second thing is that even under my high deductible plan, the insurer still pays for some preventive stuff before the deductible kicks in. This makes sense for the insurer, I guess, since it lessens the likelihood of larger covered claims later.
But the other reason is because even though we are paying for most of our health care out of pocket, we are paying at the lower “negotiated” prices that health care providers charge insurance companies. Only the uninsured minority are charged the “official” prices set by health care providers — Medicare, Medicaid, and privately insured patients typically pay a fraction. Here’s a 2003 WSJ article about the plight of an uninsured young woman — for my purposes, look at the chart at the end, which shows what insured v. uninsured pay for a routine procedure. I bet the differences in price have only increased.
The fact that uninsured patients get (to use a legal term) hosed is not new news. But it strikes me that my high deductible plan has some of the features of a protection racket. I pay premiums every month not with the expectation of ever collecting benefits (although, again, I hope I will if one of us ever gets really sick — that’s where the analogy breaks down), but to avoid the certain very bad outcome of being charged fantastically high prices for routine care — prices much, much higher than providers charge the insured. And “pay or something bad will happen” is the essence of a protection racket.
The serious note — we have a health care system in which the most vulnerable, the uninsured, are charged multiples of what actors with bargaining power — the government and insurance companies — are charged for the same services. So that’s a problem, and it’s one where government intervention is appropriate — the unregulated market is producing socially undesirable outcomes.