Issues
Functionally, medical expense insurance pays for
health care received for treatment of injury or illness. Strategically, it
performs two functions:
- It provides access to desired medical treatment
outside of that which is available from the public health services.
Often non-public health care providers will not agree to treat those
without medical expense insurance.
- It provides protection of accumulated assets
that would be subject to liquidation to pay debts arising from uninsured
medical expenses.
As you can see, health insurance is very important
for the average person to have on themselves and their loved ones. The
real issue that keeps many from obtaining the health insurance they need
is the monthly premium cost. This is usually because we are trying to buy,
or insurance agents are trying to sell, too much insurance. And by that we
mean insurance with a low deductible.
Strategy
Health insurance should be purchased to protect
against the expenses of catastrophic injury or illness, not to pay for
regular health maintenance. Payment for regular health maintenance
should be the responsibility of the individual. Following is a table
showing the difference in costs for different annual deductibles. The
quotes were for exactly the same policy, (on a 43-year old non-smoking
male living in Florida), from the same company, obtained at the same time:
| Annual
Deductible |
Monthly Premium |
Annual
Premium |
| $250 |
$132 |
$1,584 |
| $500 |
$119 |
$1,428 |
| $1,000 |
$109 |
$1,308 |
| $2,500 |
$74 |
$888 |
| $5,000 |
$54 |
$648 |
By changing from a $250 to $2,500 annual
deductible, the annual premium decreases by 44% or $696 per year. It takes
only 39 months of premium savings to save the $2,250 difference in
deductibles. Therefore, you should obtain a low deductible policy only if
you expect to be hospitalized more frequently than every 39 months (3¼
years).
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