Do you have health insurance?
If not, you are “self insured”.
Self insurance means that you don’t buy insurance and instead assume all of the financial risk yourself. If you are out of work, and have been relatively healthy over the course of the last few years, it may be tempting from a financial standpoint to self insure.
In addition, the premiums associated with COBRA or individual health insurance in your state might be prohibitively expensive. The following thoughts might be going through your head:
- “I take good care of myself and rarely need to go to the doctor. And, I don’t take any medicines. Why should I get health insurance?”
- “Health insurance would be great, but the $700 per month for my COBRA is just too expensive right now.”
- “My health is fine at the moment, but the medical condition I experienced six years ago is going to cause the insurance companies to charge me a fortune in premiums. I’ll take the risk of paying for my own healthcare.”
The reasoning in all three of these scenarios is certainly justifiable. You don’t think that the benefits of health insurance justify what you would be paying for it. While this may indeed be true in many cases, there are a few important risks surrounding self insurance that you must consider:
- Probability of Needing Medical Care: Unlike nearly every other product or service that you purchase, the rationale for obtaining health insurance is not necessarily to extract value from the service that you are purchasing, but rather to protect against low probability events. No matter how stellar your current health condition, it is impossible for anyone to predict with clarity the likelihood of needing an expensive medical procedure at some point in the future.
- Lack of preventive care: Data indicates that uninsured individuals are more likely to experience health problems because of a lack of preventive care. When you are paying 100% of your own medical costs, there is a tendency to postpone various routine screening treatment, e.g. annual physicals, which can result in medical issues going undetected. (Note: You can argue that if you are self insured you are more likely to take care of yourself and seek help when there are early warning signs, but in practice this is rarely the case.)
- A gap in coverage: Federal law in the United States considers someone who goes without health insurance for more than 63 days to have a “gap in coverage.” Consequently, insurance regulators allow insurance companies to discriminate against people who have had their health insurance coverage lapse. First, if you sign up for a group health insurance policy with a new employer, the insurance company will have the right to exclude coverage of any pre-existing conditions for up to a year. In addition, if you have been without health coverage for more than 63 days and apply for individual coverage, insurance companies may refuse to cover your pre-existing conditions, or may choose to not cover you at all!
You Have Choices
Depending on your health condition, you can get quality health insurance at a reasonable price in the private health insurance market. In addition, there are low-cost and free alternatives that are rarely publicized.