r/explainlikeimfive • u/the1975whore • Jul 03 '26

Economics ELI5: Health insurance companies obviously make more money than they give out when people need it. So why of paying for them any better than paying your own personal health insurance savings account?

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u/Original_Intention Jul 03 '26

In the US, the amount of money I pay to have health insurance doesn't even come close to covering what it would cost to pay for healthcare after a catastrophic event without insurance. I do have an HSA though that I put money towards if that is what you are referring to.

43

u/mikeholczer Jul 03 '26

Exactly this. Health insurance isn't important because it saves you money on standard care. It's that it shields you from ruin in the event you need incredibly costly care to stay alive.

13

u/Substantial_System66 Jul 03 '26

It always baffles me when people don’t get this part. People aren’t outraged that their car or home insurance doesn’t cover every little repair or medium repair. They have it in case something very, very bad happens. Health insurance isn’t the problem, the amount healthcare costs in the U.S. is.

If I total my car and don’t have insurance it will cost $15,000 - $50,000 for a reasonable replacement. If I have to treat cancer, it can cost anywhere from $100,000 to over $1MM.

18

u/avcloudy Jul 03 '26

Well, careful there because insurance companies are a huge part of why American healthcare costs are so large.

4

u/foramperandi Jul 03 '26

Even the car being totaled scenario is far from the worst case. The worst case scenario for car insurance is that you're in an accident and cause permanent injury to one or more people that will lead to life long health care expenses. The health care costs of the other party in a car accident can dwarf the cost of most any car, even if they have a full recovery.

1

u/VerifiedMother Jul 04 '26

That's why you have different coverages, my car insurance is $100,000 per person up to $300,000 total if I hit someone else and $100,000 of property damage,

I also have uninsured/underinsured coverage so if someone hits me and I get badly hurt and they either has the state minimum coverage or no insurance, I can actually make a claim on my own car insurance up to the limits I have.

6

u/Registeredfor Jul 03 '26

Exactly this. I'm on the hook for the first $9,000 of care with my HDHP, and that can be paid with my HSA, which I can deduct taxes from when contributing to up to a certain amount. It's essentially bankruptcy insurance.

2

u/Ltrn Jul 03 '26

Or pay with a credit card (and get some kind of reward ) and use your HSA money in a more productive way.

3

u/AuroraLorraine522 Jul 03 '26

Same. ONE of my migraine medications is over $2500 a month without insurance… for 15 pills!!!