But aren’t the insurance companies just ripping people off to make a profit?
Another common misconception (furthered by a news media eager to point a finger at someone for the high cost of medical care) is that health insurance companies pay little claims, and most of the premiums become pure profit for the corporation. The facts say otherwise: a typical health insurance company pays out about 80-85% of collected premium in the form of claims (per the new healthcare legislation) and only retains about 5-8% in profits; the remainder is gobbled up in administrative costs. In some years, when claims are lower than expected, the extra profit is invested, where it earns a return that is then used to lower premiums. In addition, the insurance company uses its financial clout to negotiate rates with its health care providers. This means that although they pay out 80-85%% in claims, the total value to the policyholder is actually much greater, because the premiums reflect the lower contracted rates that the insurance company negotiates with its providers. In other words, even millionaires (who can live without insurance), on balance, receive more value from a health insurance policy than the premium paid.
How about if I just roll the dice and go without insurance?
Chances are, you can choose to skip out on health insurance, and you may be just fine. A lot of people go decades without a major medical emergency. But eventually, nearly everyone gets sick or suffers a catastrophic injury that requires expensive medical care. Since no one knows when it’ll be their turn, major medical insurance is indispensable. If a major emergency or condition should arise and you are uninsured, the financial impact can be devastating. In fact, medical bills are the number one cause for bankruptcy in the United States. Bankruptcy is by no means a get-out-of-jail-free card; it will mean at least ten years of severe financial hardship, in which the many transactions that most of us take for granted, such as obtaining credit, leasing or buying a place to live, or even getting a job, will become painfully difficult. As you can see, when all these factors are considered, obtaining major medical coverage is one of the most important things you can do for yourself and your family to secure your health and financial future.