[ucodegen]

I have no data for 1990-1996 and 2004-2010, but let’s assume the same 9% annual increase.

I think this is a shaky way to extrapolate. Also, why don’t you have data for 2004-2010 since you are using your own insurance for an example?

I know that premiums on health insurance have increased faster than CPI, but has the actual cost of health care for cash payers? I’m starting to see greater and greater gaps from my experience. When I got very ill, I was expecting that the costs would put a very serious dent in the money I set aside, but I found that I could quickly negotiate cash discounts and the damage to the savings was not that great. My personal experience with dental experience also agrees with this. I found that only if I maxed out my dental ‘work’/charges, would insurance be less expensive than pay-as-you-go. I also found that I would have nearly hit the cap (I have a lot of crowns).

Americans also tend to be ‘over medicated’. Start with one drug to counter something simple and follow with a lot more to counter the side effects of the first drug and each following drug. This may have some bearing on the costs we are seeing.

I don’t see the justification for the increases in the premiums, and making insurance mandatory will not decrease the premiums. By making insurance mandatory, you have created a limited monopoly that favors insurance companies. Insurance companies were starting to hit a limit with any increases in profits. As the premium rates started to rise, people were dropping off insurance. Solution, in the insurance company eyes, is to make insurance mandatory. By the way, in the period you referenced, the profits of insurance companies increased 2.5 times from 2000 to 2009.

[ucodegen]

I have no data for 1990-1996 and 2004-2010, but let’s assume the same 9% annual increase.

I think this is a shaky way to extrapolate. Also, why don’t you have data for 2004-2010 since you are using your own insurance for an example?

I know that premiums on health insurance have increased faster than CPI, but has the actual cost of health care for cash payers? I’m starting to see greater and greater gaps from my experience. When I got very ill, I was expecting that the costs would put a very serious dent in the money I set aside, but I found that I could quickly negotiate cash discounts and the damage to the savings was not that great. My personal experience with dental experience also agrees with this. I found that only if I maxed out my dental ‘work’/charges, would insurance be less expensive than pay-as-you-go. I also found that I would have nearly hit the cap (I have a lot of crowns).

Americans also tend to be ‘over medicated’. Start with one drug to counter something simple and follow with a lot more to counter the side effects of the first drug and each following drug. This may have some bearing on the costs we are seeing.

I don’t see the justification for the increases in the premiums, and making insurance mandatory will not decrease the premiums. By making insurance mandatory, you have created a limited monopoly that favors insurance companies. Insurance companies were starting to hit a limit with any increases in profits. As the premium rates started to rise, people were dropping off insurance. Solution, in the insurance company eyes, is to make insurance mandatory. By the way, in the period you referenced, the profits of insurance companies increased 2.5 times from 2000 to 2009.

[ucodegen]

I have no data for 1990-1996 and 2004-2010, but let’s assume the same 9% annual increase.

I think this is a shaky way to extrapolate. Also, why don’t you have data for 2004-2010 since you are using your own insurance for an example?

I know that premiums on health insurance have increased faster than CPI, but has the actual cost of health care for cash payers? I’m starting to see greater and greater gaps from my experience. When I got very ill, I was expecting that the costs would put a very serious dent in the money I set aside, but I found that I could quickly negotiate cash discounts and the damage to the savings was not that great. My personal experience with dental experience also agrees with this. I found that only if I maxed out my dental ‘work’/charges, would insurance be less expensive than pay-as-you-go. I also found that I would have nearly hit the cap (I have a lot of crowns).

Americans also tend to be ‘over medicated’. Start with one drug to counter something simple and follow with a lot more to counter the side effects of the first drug and each following drug. This may have some bearing on the costs we are seeing.

I don’t see the justification for the increases in the premiums, and making insurance mandatory will not decrease the premiums. By making insurance mandatory, you have created a limited monopoly that favors insurance companies. Insurance companies were starting to hit a limit with any increases in profits. As the premium rates started to rise, people were dropping off insurance. Solution, in the insurance company eyes, is to make insurance mandatory. By the way, in the period you referenced, the profits of insurance companies increased 2.5 times from 2000 to 2009.

[ucodegen]

You guys are working with today’s $1.5K, extended through 20 years to get to $600K in 2030 dollars. You need to start by putting away the cost of premium from 1990. There is just no way the combined premiums since 1990 sitting in a vehicle available to general public would lead to $700K in today’s dollars.

You mean adjust for inflation because if I was starting the comparison at 1990, $1500 would be worth more in 1990 than now…

This is why I used S&P500 numbers as well. With the rate adjusted for inflation (approx 2.8% avg), I got about 6.8% ROI from S&P 500, which does give me more than $600k starting at the equivalent 1990 and the equiv $1500 adjusted for inflation. Using backwards CPI adjustment on inflation of 2.8%/yr, I started with $858.26/month adjusting each pay period by inflation and having an ROI of 10.8% not adjusted for inflation: year 20 gave me $808,413.38 with the monthly contrib at year 20 being $1500.

[ucodegen]

You guys are working with today’s $1.5K, extended through 20 years to get to $600K in 2030 dollars. You need to start by putting away the cost of premium from 1990. There is just no way the combined premiums since 1990 sitting in a vehicle available to general public would lead to $700K in today’s dollars.

You mean adjust for inflation because if I was starting the comparison at 1990, $1500 would be worth more in 1990 than now…

This is why I used S&P500 numbers as well. With the rate adjusted for inflation (approx 2.8% avg), I got about 6.8% ROI from S&P 500, which does give me more than $600k starting at the equivalent 1990 and the equiv $1500 adjusted for inflation. Using backwards CPI adjustment on inflation of 2.8%/yr, I started with $858.26/month adjusting each pay period by inflation and having an ROI of 10.8% not adjusted for inflation: year 20 gave me $808,413.38 with the monthly contrib at year 20 being $1500.

[ucodegen]

You guys are working with today’s $1.5K, extended through 20 years to get to $600K in 2030 dollars. You need to start by putting away the cost of premium from 1990. There is just no way the combined premiums since 1990 sitting in a vehicle available to general public would lead to $700K in today’s dollars.

You mean adjust for inflation because if I was starting the comparison at 1990, $1500 would be worth more in 1990 than now…

This is why I used S&P500 numbers as well. With the rate adjusted for inflation (approx 2.8% avg), I got about 6.8% ROI from S&P 500, which does give me more than $600k starting at the equivalent 1990 and the equiv $1500 adjusted for inflation. Using backwards CPI adjustment on inflation of 2.8%/yr, I started with $858.26/month adjusting each pay period by inflation and having an ROI of 10.8% not adjusted for inflation: year 20 gave me $808,413.38 with the monthly contrib at year 20 being $1500.

[ucodegen]

You guys are working with today’s $1.5K, extended through 20 years to get to $600K in 2030 dollars. You need to start by putting away the cost of premium from 1990. There is just no way the combined premiums since 1990 sitting in a vehicle available to general public would lead to $700K in today’s dollars.

You mean adjust for inflation because if I was starting the comparison at 1990, $1500 would be worth more in 1990 than now…

This is why I used S&P500 numbers as well. With the rate adjusted for inflation (approx 2.8% avg), I got about 6.8% ROI from S&P 500, which does give me more than $600k starting at the equivalent 1990 and the equiv $1500 adjusted for inflation. Using backwards CPI adjustment on inflation of 2.8%/yr, I started with $858.26/month adjusting each pay period by inflation and having an ROI of 10.8% not adjusted for inflation: year 20 gave me $808,413.38 with the monthly contrib at year 20 being $1500.

[ucodegen]

You guys are working with today’s $1.5K, extended through 20 years to get to $600K in 2030 dollars. You need to start by putting away the cost of premium from 1990. There is just no way the combined premiums since 1990 sitting in a vehicle available to general public would lead to $700K in today’s dollars.

You mean adjust for inflation because if I was starting the comparison at 1990, $1500 would be worth more in 1990 than now…

This is why I used S&P500 numbers as well. With the rate adjusted for inflation (approx 2.8% avg), I got about 6.8% ROI from S&P 500, which does give me more than $600k starting at the equivalent 1990 and the equiv $1500 adjusted for inflation. Using backwards CPI adjustment on inflation of 2.8%/yr, I started with $858.26/month adjusting each pay period by inflation and having an ROI of 10.8% not adjusted for inflation: year 20 gave me $808,413.38 with the monthly contrib at year 20 being $1500.

[ucodegen]

So it’s an almost successful plan — if I save all my premiums, get an unusually high rate of return and no one in my family has a single medical bill for 20 years. And then I get in a car accident.

I wouldn’t call 6% an unusually high rate of return. I ran the numbers for 6% accrued monthly on $1,500 per month — got $693,061.30 for year 20. The growth due to ROI became greater than the monthly contrib at year 12 and 8 months.

For laughs and giggles, I put in 10.8% which is around the historical S&P500 return (continuous 1950 to 2008). This gave me $1,264,626.66 with flat $1,500/month. The ROI exceeds the monthly contrib at year 7 and 6 months.

By the way, the historical return through Berkshire Hathaway is higher than 10%…

BTW, auto insurance is supposed to cover medical, and you are not likely to see $700k on an auto accident. I know someone who went through a windshield and had the face literally pealed back.. it cost less than $700k (they were also not wearing seat belts and no airbag).

Someone is missing the whole meaning of the word “insurance.”

Never missed the meaning. I have always felt that insurance should only be used to reduce risk, not to try to reduce actual health costs. Insurance does well to reduce risk, but it makes the regular costs more expensive. As the saved amount increases, just reduce insurance covering catastrophic events.

[ucodegen]

So it’s an almost successful plan — if I save all my premiums, get an unusually high rate of return and no one in my family has a single medical bill for 20 years. And then I get in a car accident.

I wouldn’t call 6% an unusually high rate of return. I ran the numbers for 6% accrued monthly on $1,500 per month — got $693,061.30 for year 20. The growth due to ROI became greater than the monthly contrib at year 12 and 8 months.

For laughs and giggles, I put in 10.8% which is around the historical S&P500 return (continuous 1950 to 2008). This gave me $1,264,626.66 with flat $1,500/month. The ROI exceeds the monthly contrib at year 7 and 6 months.

By the way, the historical return through Berkshire Hathaway is higher than 10%…

BTW, auto insurance is supposed to cover medical, and you are not likely to see $700k on an auto accident. I know someone who went through a windshield and had the face literally pealed back.. it cost less than $700k (they were also not wearing seat belts and no airbag).

Someone is missing the whole meaning of the word “insurance.”

Never missed the meaning. I have always felt that insurance should only be used to reduce risk, not to try to reduce actual health costs. Insurance does well to reduce risk, but it makes the regular costs more expensive. As the saved amount increases, just reduce insurance covering catastrophic events.

[ucodegen]

So it’s an almost successful plan — if I save all my premiums, get an unusually high rate of return and no one in my family has a single medical bill for 20 years. And then I get in a car accident.

I wouldn’t call 6% an unusually high rate of return. I ran the numbers for 6% accrued monthly on $1,500 per month — got $693,061.30 for year 20. The growth due to ROI became greater than the monthly contrib at year 12 and 8 months.

For laughs and giggles, I put in 10.8% which is around the historical S&P500 return (continuous 1950 to 2008). This gave me $1,264,626.66 with flat $1,500/month. The ROI exceeds the monthly contrib at year 7 and 6 months.

By the way, the historical return through Berkshire Hathaway is higher than 10%…

BTW, auto insurance is supposed to cover medical, and you are not likely to see $700k on an auto accident. I know someone who went through a windshield and had the face literally pealed back.. it cost less than $700k (they were also not wearing seat belts and no airbag).

Someone is missing the whole meaning of the word “insurance.”

Never missed the meaning. I have always felt that insurance should only be used to reduce risk, not to try to reduce actual health costs. Insurance does well to reduce risk, but it makes the regular costs more expensive. As the saved amount increases, just reduce insurance covering catastrophic events.

[ucodegen]

So it’s an almost successful plan — if I save all my premiums, get an unusually high rate of return and no one in my family has a single medical bill for 20 years. And then I get in a car accident.

I wouldn’t call 6% an unusually high rate of return. I ran the numbers for 6% accrued monthly on $1,500 per month — got $693,061.30 for year 20. The growth due to ROI became greater than the monthly contrib at year 12 and 8 months.

For laughs and giggles, I put in 10.8% which is around the historical S&P500 return (continuous 1950 to 2008). This gave me $1,264,626.66 with flat $1,500/month. The ROI exceeds the monthly contrib at year 7 and 6 months.

By the way, the historical return through Berkshire Hathaway is higher than 10%…

BTW, auto insurance is supposed to cover medical, and you are not likely to see $700k on an auto accident. I know someone who went through a windshield and had the face literally pealed back.. it cost less than $700k (they were also not wearing seat belts and no airbag).

Someone is missing the whole meaning of the word “insurance.”

Never missed the meaning. I have always felt that insurance should only be used to reduce risk, not to try to reduce actual health costs. Insurance does well to reduce risk, but it makes the regular costs more expensive. As the saved amount increases, just reduce insurance covering catastrophic events.

[ucodegen]

So it’s an almost successful plan — if I save all my premiums, get an unusually high rate of return and no one in my family has a single medical bill for 20 years. And then I get in a car accident.

I wouldn’t call 6% an unusually high rate of return. I ran the numbers for 6% accrued monthly on $1,500 per month — got $693,061.30 for year 20. The growth due to ROI became greater than the monthly contrib at year 12 and 8 months.

For laughs and giggles, I put in 10.8% which is around the historical S&P500 return (continuous 1950 to 2008). This gave me $1,264,626.66 with flat $1,500/month. The ROI exceeds the monthly contrib at year 7 and 6 months.

By the way, the historical return through Berkshire Hathaway is higher than 10%…

BTW, auto insurance is supposed to cover medical, and you are not likely to see $700k on an auto accident. I know someone who went through a windshield and had the face literally pealed back.. it cost less than $700k (they were also not wearing seat belts and no airbag).

Someone is missing the whole meaning of the word “insurance.”

Never missed the meaning. I have always felt that insurance should only be used to reduce risk, not to try to reduce actual health costs. Insurance does well to reduce risk, but it makes the regular costs more expensive. As the saved amount increases, just reduce insurance covering catastrophic events.

[ucodegen]

I’m fortunate that, until this year, my employer was pretty generous in how much they covered. I did not count the employer contribution since that was NOT out of my pocket.

I found that including employer contrib really did change the numbers, as well as the rate you applied for internal rate of return (I ran it both ways)

This isn’t the first time I’ve done your exercise… When high deductable HSA plans were rolled out a few years ago I started doing this every year. So far, it doesn’t make sense… but being an anal engineer – I’ll keep doing the math every year.

As do I.. for me, it didn’t pencil out. I do have to start watching for colon polyps soon because one side of the family had colon cancer, though it could also have been their nutritional behavior too.

Good for you for saving >$700k, but it’s not useful for public policy. Maybe 1% of the country could practically save $250k to self-insure a family, and it would take them a decade to get there. And once they got there, would they even notice the cost of a high-deductible policy?

Why deny the ability to pay direct to those that can and/or have the discipline to save up enough to do this? You also have to realize that for most people, they will never have anything near this cost. Insurance reduces the risk of the big one.. but it also increases the cost if you try to use it for regular visits.

I only know what I heard from the widow at the time. I do know the liver was (at the least one of the) thing they couldn’t fix.

Had to be from something different then the accident.. but worsened by the accident. If you have cirrhosis, the liver will not repair itself well from impact injury.

[ucodegen]

I’m fortunate that, until this year, my employer was pretty generous in how much they covered. I did not count the employer contribution since that was NOT out of my pocket.

I found that including employer contrib really did change the numbers, as well as the rate you applied for internal rate of return (I ran it both ways)

This isn’t the first time I’ve done your exercise… When high deductable HSA plans were rolled out a few years ago I started doing this every year. So far, it doesn’t make sense… but being an anal engineer – I’ll keep doing the math every year.

As do I.. for me, it didn’t pencil out. I do have to start watching for colon polyps soon because one side of the family had colon cancer, though it could also have been their nutritional behavior too.

Good for you for saving >$700k, but it’s not useful for public policy. Maybe 1% of the country could practically save $250k to self-insure a family, and it would take them a decade to get there. And once they got there, would they even notice the cost of a high-deductible policy?

Why deny the ability to pay direct to those that can and/or have the discipline to save up enough to do this? You also have to realize that for most people, they will never have anything near this cost. Insurance reduces the risk of the big one.. but it also increases the cost if you try to use it for regular visits.

I only know what I heard from the widow at the time. I do know the liver was (at the least one of the) thing they couldn’t fix.

Had to be from something different then the accident.. but worsened by the accident. If you have cirrhosis, the liver will not repair itself well from impact injury.

[Author]

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