I have 6 brothers so when I reference a brother in a blog it is not always the same one. A few weeks back one of my brothers was telling me how he thought his car insurance was a rip-off. He said he is always paying for it and never had a claim. So I said, “well, why don’t you take your car and drive it into a tree and then you will get your money’s worth”. Insurance gets a bad rap. However, I think it is the industry in general that does a poor job developing products, educating consumers, and clearly stating their value proposition.
One of the reasons insurance gets a bad rap is that nobody really understands it. Another is that while the majority pay the minority get some form of payment in excess of what they paid in. Insurance, for the most part, is about having peace of mind. I try to tell my brother, imagine driving a brand new car through Manhattan or in the snow with no insurance. You would be very cautious. If your car was very used then maybe you wouldn’t care, but with a new car it would be different. It is knowing you have insurance that makes it easier to navigate tough situations.
Insurance It is not intended to be perceived as some form of savings plan or reimbursement policy. Insurance is designed to protect someone from an unanticipated event that can cause significant financial loss and harm. This also has been lost on the market and in the narrative. Since when should an office visit be considered an insurable event? People spend more money on Starbucks in the morning or going to the movies or out to dinner on weekends than they do on health insurance out of pocket costs. And what is the average monthly cell phone bill for a family?
Most people also don’t understand how insurance is priced. In fact, one of the major problems with health insurance is that it is essentially a one-year term policy. Medical insurance should give people options like Life Insurance so they can see the costs over their lifetime. If I buy an annual renewable term policy I would see how the costs go up every year as I get older. However, if I bought a 30-year level term I would see that while I pay more when I am young relative to a one year -term, I am paying less as I get older. I understand rates would need to be adjusted for inflation. But people don’t understand this. They need to understand their costs over time to realize why you have to pay more when you are younger. I thought one of the biggest mistakes of Obamacare is the age rating. It is started this division between old and young. “Why should I pay for the old guys?”
People also think the government will take care of things if you don’t have insurance, or you can go to a hospital and get treatment without having to pay. With disability many think the government will step-in. That belief of a safety net makes it too easy to take chances. I know so many people on social security disability it is unbelievable. And I know they can work. It seems too easy.
So what are my solutions? First, make a law that says health care costs are not exempt from bankruptcy. If that is the case, then every parent will be telling their child to not take the chance of ruining their financial lives by not buying insurance. Every financial planner would make buying health insurance a priority. Second, health saving accounts should be available to everyone but, there should be no laws requiring the covering of expenses less than say $1000 or $2000. If ever person who turned 22 saved $50 every month for the rest of their working lives in a health savings account this would total $14,000 before any interest. Most would have enough money to cover those smaller expense for a lifetime. And don’t tell me they can’t save $50. As long as I see people walking around with cell phones I believe this can be done.
I know this blog is a little bit of a rant. I actually don’t think health insurance will be fixed without dramatic changes. I shared my opinions on how it will be fixed in other blogs. However, I also think the current narrative from the government, from insurance companies, from employers, and yes, from many brokers, is not contributing to the education of what insurance is really about. The system, in its current design, is not on a path to make things better. And I am not talking about costs. The current narrative is not educating people or giving them an understanding of what insurance is about or how much it costs. The current narrative says, don’t worry, we will take care of you.