The Importance of Health Insurance

stethoscopeA staggering number was recently released showing that over 20 million people ages 18-34 are without healthcare. There are many reasons as to why there are some many in this age group without health insurance. The main reasons include working part-time and therefore not being offered coverage, not being offered coverage regardless and not being able to afford coverage on your own, and pre-existing conditions.

With the passage of the Affordable Care Act a few years ago, individuals up to the age of 26 can be covered under their parent’s healthcare policy. There is a caveat to this however: until 2014, grandfathered plans don’t have to offer the coverage. But what if you aren’t able to be covered under your parent’s policy for some reason? What then?

Buy Your Own Coverage

With the passage of the Affordable Care Act, individuals will not be able to buy insurance coverage on their own. The law claims that the cost for purchasing this coverage will not be prohibitive. Recent studies have shown that for a 27 year old male, the most basic insurance plan would cost him roughly $150 per month. Note that his is just for the premium. That plan would come with a deductible of roughly $4,000. (These numbers are just estimates as true numbers will not come out until 2014.)

What this is saying is that is this is you, you would pay $150 per month or $1,800 for insurance coverage. Should you need to receive healthcare services, you would have to pay the first $4,000. Everything above $4,000 would be covered by the insurance company. There might be some services that are covered under the policy, this is just a hypothetical.

What if You Forego Coverage?

If you choose not to have coverage, you have to pay a penalty. The minimum penalty will start in 2014 at $95 per person and increase to $695 per person in 2016. After that, the penalty will increase with the rate of inflation. At first glance, $695 may seem like a lot, but it is much less than actually paying for coverage.

Should You Forego Coverage?

It might be tempting to save close to $1,100 per year by not having health insurance. But remember that you are just one accident away from entering into mountains of debt. Saving $1,100 sounds good, but it won’t be good when you have a $10,000 medical bill to pay. While you can argue that you are young and healthy, you cannot argue the fact that you donít know what is going to happen. Here are some random average costs to consider:

MRI: $1,100
Daily Stay in Hospital: $4,000
X-Ray: $500

Let’s say you have pain in your shoulder. You visit you doctor who orders an x-ray. They find nothing but order an MRI jus to be safe. The MRI shows you have some inflammation and need some basic prescription drug. Your out of pocket cost without insurance: $1,725 (I used the figures above the x-ray and MRI and assumed the doctor visit was $100 and the prescription was $25.)

Final Thoughts

The idea here is just to show you how much healthcare services cost. At the end of the day, you have to decide if you want to take the risk by not having coverage or not. Personally, I would recommend it. But it is up for you to decide.

Disclaimer: All of the projected numbers here are based on estimates. They will vary based on age and where you live. You can expect to have a higher premium if you live in New York City versus Alabama.

Featured image provided by Rosmary via Flickr CC.

11 Responses to The Importance of Health Insurance

  1. As someone who has always been on a company sponsored plan, I’m interested in learning more about the healthcare reforms taking effect next year. Does this impact me in any way? Should I be shopping around for a better plan than what my employer offers?

  2. I have no idea how anyone can no have health insurance. I understand that it expensive, but there are so many options that don;t cost a ton. It could be financially destructive if something were to happen and not have insurance.

    • Sarah says:

      Keep in mind that insurance premiums vary wildly depending on where you live. In New York, the most basic individual HDHP plan costs about $200 per month through Healthy NY. However, you’re only eligible if your employer doesn’t offer coverage and you make less than $28K per year (before taxes).

      If you’re not eligible for Healthy NY, the most basic HDHP plan through a private insurer costs at least $400… possibly more depending on the provider.

      Yes, it’s a gamble. I don’t disagree. However, I can also understand why those who are young and healthy go without coverage here.

  3. Shortly after I graduated I went without health insurance. It was a terrifying time. Each time I got a sore throat I pictured bankruptcy due to medical bills. If you are wondering why people go without insurance, look at the price of COBRA coverage.

  4. I agree with Sean. There are a lot of options out there that this shouldn’t be ignored. You never know what will happen and the peace of mind that goes along with health insurance can’t be bought by money.

  5. Sarah says:

    Side note: There are many exceptions to the insurance mandate. If premiums (after employer contributions and federal subsidies) still exceed 8% of your income, you don’t have to pay the penalty. For someone making $30K per year, a $200 monthly premium would be enough to avoid the penalty.

    Regardless, anyone who opts out of health insurance is taking a huge risk… but I have a feeling that, unless we go to full-fledged universal health care, there will always be people in that boat.

  6. Lottie Knapp says:

    Coverage protects the interests of individual healthcare professionals for covered claims arising from their professional practice. License protection coverage and deposition representation are examples of additional coverage extensions provided in this program.

  7. Your group health plan can require you to pay for COBRA continuation coverage. The amount charged to qualified beneficiaries cannot exceed 102 percent of the cost to the plan for similarly situated individuals covered under the plan who have not incurred a qualifying event. In determining COBRA premiums, the plan can include the costs paid by employees and the employer, plus an additional 2 percent for administrative costs.

  8. Medicaid: Depending on his income and resources, an individual may be eligible for Medicaid to pay for all or some of the expenses. Full Medicaid coverage would be available to a person over age 65 if he or she met the income and resource levels set by the state that individual resides in. If the income were too high, the individual might still be eligible for assistance with Medicare cost-sharing under the Qualified Medicare Beneficiaries (QMB) program, or with premium payments for Specified Low-Income Medicare Beneficiaries (SLMBs), Qualified Disabled and Working Individuals (QDWIs) and Qualified Individuals (QIs). If the individual is eligible for full Medicaid coverage, Medicare would still be the primary insurer. Thus, the individual could not be charged co-insurance, and Medicaid would pay for services covered by Medicaid but not by Medicare.

  9. Other key regulatory issues for children that are expected to be addressed in guidance in the coming weeks and months include: functionality issues related to exchange coverage, including how families will be treated with respect to eligibility for subsidies and transitions between public coverage and the exchanges; definitional issues related to pediatric benefits offered in the exchanges; and issues related to the elimination of cost-sharing for preventive care services.

  10. It’s really recommended that one has life insurance. I mean we don’t know what will happen tomorrow, so, it’s better to be prepared.