Insurance

Health Insurance Is It Worth The Cost?

If you‘re in need of health insurance, you might be shocked at how much it costs to buy outright. But is the cost of having health insurance worth it? Find out here.

Health Insurance Is It Worth The Cost?

Look, all of us know that health insurance is CRAZY expensive. In fact, it’s now crossed more than $20,000 per year.But it’s a necessity…right?

Think about a patient like Jessica Pell, for example, who was featured in a Vox article on the cost of healthcare.

Pell had:

“…fainted and hit her head on a nearby table, cutting her ear. She went to the emergency room at Hoboken University Medical Center, where she was given an ice pack. She received no other treatment. She never received any diagnosis. But a bill arrived in the mail for $5,751.”

Think about that.

That’s without the cost of doctor’s visits, specialists, medication, surgery, tests, medical materials, and so on and so forth.

Even a simple injury that requires hospitalization or minor illness can set you back financially.

Big time.

Remember, health insurance is there to cover you for the risk of being in an accident or falling ill. However, what it all boils down to at the end of the day is value for the money.

In order to determine this, you have to look at what your health insurance covers, relative to what you’re paying for the coverage.

What’s Ahead:

Cost of health insurance

The cost of your health insurance is based on several factors. According to HealthCare.gov, there are five factors that are used to price your health insurance premiums:

Age

Your premium may be up to three times higher if you’re older.

Location

The state and local municipality you live in will have a big impact on your health insurance costs. There are state and local laws, the cost of living, and healthcare competition to consider.

Tobacco use

If you smoke or use another form of tobacco, expect to see up to a 50% rate hike versus those who don’t.

Individual vs. family enrollment

If you are covering more than just yourself, for example, a spouse and children, your premium will surely be higher.

Plan category

There are five different plans you can choose from – and each has a different premium and out of pocket cost. I’ll cover this more below.

Average costs by state

Below is a data set that our friends at Value Penguin put together for 2020. It shows the monthly and annual cost of healthcare, on average, by state, as well as the percentage change against the national average (which is seen at the bottom).

State Monthly cost Annual cost
Alabama $357.63 $4,291.56
Alaska $519.43 $6,233.16
Arizona $403.89 $4,846.68
Arkansas $303.58 $3,642.96
California $347.78 $4,173.36
Colorado $390.00 $4,680.00
Connecticut $356.03 $4,272.3
Delaware $429.35 $5,152.20
Florida $449.84 $5,398.08
Georgia $442.03 $5,304.36
Hawaii $356.40 $4,276.80
Idaho $343.79 $4,125.48
Illinois $420.97 $5,051.64
Indiana $291.46 $3,497.52
Iowa $501.89 $6,022.68
Kansas $382.14 $4,585.68
Kentucky $314.61 $3,775.32
Louisiana $485.50 $5,826.00
Maine $420.96 $5,051.52
Maryland $330.91 $3,970.92
Massachusetts $448.50 $5,382.00
Michigan $336.53 $4,038.36
Minnesota $351.82 $4,221.84
Mississippi $401.76 $4,821.12
Missouri $481.00 $5,772.00
Montana $379.45 $4,553.40
Nebraska $510.81 $6,129.72
Nevada $430.28 $5,163.36
New Hampshire $378.48 $4,541.76
New Jersey $405.45 $4,865.40
New Mexico $322.35 $3,868.20
New York $662.87 $7,954.44
North Carolina $449.90 $5,398.80
North Dakota $291.49 $3,497.88
Ohio $321.75 $3,861.00
Oklahoma $399.81 $4,797.72
Oregon $328.76 $3,945.12
Pennsylvania $370.30 $4,443.60
Rhode Island $285.51 $3,426.12
South Carolina $383.40 $4,600.80
South Dakota $407.13 $4,885.56
Tennessee $518.24 $6,218.88
Texas $374.49 $4,493.88
Utah $349.83 $4,197.96
Vermont $529.71 $6,356.52
Virginia $415.73 $4,988.76
Washington $340.02 $4,080.24
West Virginia $443.00 $5,316.00
Wisconsin $411.40 $4,936.80
Wyoming $590.09 $7,081.08
National average $403.36
$4,840.33

Costs vs. benefits of health insurance

My cost versus benefit calculation for health insurance is determined on a very individual basis. The principle is how much benefit you are getting from your health insurance relative to how much you’re paying.

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For example, if you’re buying a property, the benefits are pretty clear, relative to the price you’re paying. At the end of the day, you own the property which will probably appreciate in value and give you financial returns in the long run while providing you with a roof over your head in the present.

The same goes for services. If you pay someone to wash your car, your car is clean and the benefit is clear.

This is, however, not the case with health insurance. You can pay for months and months and never make a claim to the insurance provider.

This is why risk is such an important factor in health insurance. So in addition to the benefits you may be receiving, you need to calculate the risk involved with falling ill or sustaining an injury, especially a serious disease or accident.

This is probably the most difficult and complicated factor to take into account when determining the value of health insurance.

But let’s start at the beginning and take you through a quick cost versus benefit analysis to determine the value of health insurance for you as an individual:

What are your current health needs?

Do you currently have a chronic or long-term health condition? If so, then day-to-day coverage is essential, preferably with coverage for chronic medication and specialists.

A chronic health condition is generally defined as a medical condition that lasts more than three months and requires treatment, medication, or therapy during that period or for a longer-term.

If the condition may require hospitalization from time to time, having comprehensive hospital coverage is essential.

If you do not have a chronic health condition but suffer from acute illness regularly that requires multiple doctor’s visits during the year, you need day-to-day health insurance.

If you have dental or optometry needs, make sure that your health insurance covers these. Healthy, single individuals who rarely see the doctor may be able to forego day-to-day health insurance coverage.

The coverage you choose will also play an important role in the benefits you get from your insurance.

Metal tiers

There are a total of five different plan categories, which I briefly mentioned earlier. They are:

  • Bronze.
  • Silver.
  • Gold.
  • Platinum.
  • Catastrophic.

These plans are based on how the plan shares costs. For instance, Platinum plans usually have the highest premiums but the lowest out-of-pocket costs, while Bronze plans are just the opposite.

How much should you pay for health insurance?

If you’re lucky enough to work for a company that pays your health insurance for you, you still need to read the policy carefully to see what is and is not covered.

Remember that some insurance carriers will only cover a percentage of your medical expenses or have limits. If you need day-to-day cover and the employee insurance only covers hospitalization, you may want to dig into your pocket to get the necessary benefit.

If you don’t have employee health insurance, you need to draw up a budget and see how much you can afford to pay for health insurance. Keep in mind that this expense should be prioritized in your budget above clothing, entertainment, and activities that are purely for pleasure but below items such as rent, utilities, groceries, and transportation.

However, if you’re suffering from a serious or chronic health condition, the cost of health insurance may take a higher priority.

How often do you use your health insurance?

If you use your health insurance often, then it’s a simple matter of comparing how much you’re claiming versus how much you’re paying every month or year to see the benefit. However, you still need to take into account the risk factor.

Calculating the risk

Everyone is at risk of developing serious health conditions or being in a serious accident that could result in extreme medical expenses. Genetic predisposition is a good place to start when determining your risk of illness or disease. However, I do recommend at least the minimum hospital coverage to insure you when you need it most.

If you have a spouse or relationship partner, then your risk doubles. If you have a family, the risks quadruple (assuming two kids). In general, if you have a family or are over 40 years old, I suggest that you do not underestimate the worth of health insurance.

Is health insurance worth it?

The cost of health care continues to rise and there seems to be no end to this in the near future. In 2017, over $3.5 trillion was spent on health care. That averages out to about $11,000 per person. This figure is obviously much higher for 2020.

How many people do you know that have over $11,000 just lying around to cover their health care costs this year? On the other hand, health insurance costs for 2017 averaged out at about $6,690 for a single person. That’s just over half the cost of paying out of pocket for health care services.

Note: you can check out projected health care costs up to 2027 from CMS here.

For me, health insurance has been there to cover medical expenses that I simply could not have afforded on my own.

Where to get health insurance

If you’re in the situation where you need to purchase health insurance, here are a few of my favorite options right now:

HealthIQ

HealthIQ is what I’d call a “middle man” for insurance – meaning, they connect you with other insurance providers rather than selling you insurance directly themselves. Their focus is on people who live healthy lifestyles – i.e., runners, plant-based diets, etc. You take a quiz and fill out some basic information, and they’ll give you several rate quotes with insurance providers.

Note that the big difference is the discounts HealthIQ is attempting to offer to those who are actively trying to reduce their risk of health issues.

eHealth

eHealth is another “middle man” that partners with over 180 health insurance providers to offer in excess of 10,000 different types of health insurance products. What’s nice about eHealth is their customer service and availability.

If you have specific questions about your policy, they can help you get connected directly to the company that underwrites that policy – plus they’re accessible 24/7.

What does health insurance cover?

There are different types of health insurance that provide different types of coverage. Here are a few that you should know about:

Hospital coverage

This is coverage for medical expenses that are incurred once you’ve been admitted to the hospital on an inpatient basis. It should cover all doctor’s visits, tests, procedures, medical materials as well as the bed. However, it’s important to read the policy carefully.

Some insurance will only provide a percentage of coverage (for example 80%) and others may limit their coverage to a daily payout (for example $2,000 per day) which needs to pay for every expense in hospital.

As far as hospitalization is concerned, it’s always recommended to pay a little more and ensure that everything is 100% covered. Also, make sure that it covers both accident (trauma) and disease or illness in the hospital.

Day-to-day coverage

Day-to-day health insurance covers medical expenses such as primary care doctor’s visits, acute medication, and procedures in doctor’s rooms. If you’re young, single, healthy and rarely go to the doctor, this a good place to save some money on your health insurance premium or rate. You should be able to cover the cost of occasional doctor’s visits out of pocket, with an HSA, or have enough savings available.

However, if you have a family, I definitely recommend that you take out day-to-day coverage as part of your health insurance policy. Pay attention to how many visits are covered a year and whether they are covered in full, including prescribed medication and procedures performed in doctor’s rooms. Some insurance will cover a limited amount of OTC (over the counter) medication, which is a bonus.

Dental and optometry coverage

Dentistry and optometry are additional portions of health insurance and therefore cost more. They usually provide one visit per beneficiary on the policy every one to two years.

Dental insurance may only cover basic dentistry, which includes consultation, teeth cleaning, fillings, tooth extraction, etc.

It does not cover braces, dental surgery, anesthetic, or specialist dentist visits. If you have kids or are dental health issues, I recommend a health insurance policy that includes advanced dentistry.

Specialist coverage

Specialists are physicians that specialize in a specific field of health care. These include oncologists, physiotherapists, nutritionists, psychiatrists and psychologists, dermatologists, obstetricians, gynecologists, and the list goes on.

Specialists may not be covered as part of a day-to-day benefit or hospitalization. If you or your family require specialized medical care, it’s important to check whether the very expensive consultations, procedures, treatments or therapies are covered for these doctors.

Accidental and emergency coverage

This basically covers you for any procedures that can be performed in an emergency room. It also generally covers stabilization after a traumatic event such as an accident, stroke or heart attack.

Alternative medicine coverage

Alternative medicine is not commonly covered by health insurance. This includes homeopathy, naturopathy, acupuncture, etc.

There are however some insurance carriers that have health insurance plans specifically designed to cover the cost of alternative medicine. It is, however, a good idea to still have hospital coverage over and above your alternative medicine coverage.

Summary

The answer is short – YES, health insurance is worth the cost. Think about the dire financial situation you’d put yourself in if you weren’t properly covered.


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