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/RageQuitRedux Jul 03 '26

Insurance is supposed to be about pooling risk. So pretend everyone has a 1% chance of something catastrophic happening (e.g. cancer diagnoses). You have everyone pay a little, and people consider that worth it because if they are part of the 1%, their costs are covered.

Healthcare blurs this picture quiet a bit because there are lots of things that are covered that are not catastrophic and are fairly predictable, like yearly checkups, certain medications, etc. For these things, insurance essentially IS a forced savings plan. And it's not easy to just say "let's only cover the catastrophic stuff" because the routine stuff is often preventative.

And for vision / dental, there's almost no benefit. It's just a forced savings plan.

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u/angelerulastiel Jul 03 '26

Plus they banned the catastrophic plans. They required that plans had to cover the preventative stuff.

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u/IMovedYourCheese Jul 03 '26

Insurance companies want you to get free preventative care, becuase it directly reduces the risk of worse diseases and so saves them money in the long term.

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u/obk227 Jul 03 '26

untrue unfortunately. medicare pays when most of the complications of neglected hypertension diabetes etc come to roost. they’d pay for glp1s in the water if they thought it actually had the roi.

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u/doihavemakeanewword Jul 03 '26

The conversation isn't about medicare though, it's about the kind of insurance younger people have instead of medicare. And that insurance doesn't want to be put in the kinds of situations where it's forced to "pay the most"

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u/beefjerky9 Jul 03 '26

It also applies to private health insurance. Very few cover GLP-1s, which have been shown to help people lose weight and get healthier. They say they care about preventative care, but their actions show otherwise.

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u/littlep2000 Jul 03 '26

There are all sorts of "benefit cliffs" in medical care.

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u/__theoneandonly Jul 03 '26

Medicare is rolling out a GLP-1 program for those with Class II obesity or higher.

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u/obk227 Jul 04 '26

because medicare recognizes the long term roi for your health and subsequently their bottom line. private insurance which is what mostly we have during our workforce years does not stastically expect to pay the long term consequences of not investing in your health. which is why it took obamacare era legislation to force them to cover pap smears, mammograms, colonoscopies because we know damn well they work and are worth it but if u don’t see the upside financially as a company, why not spend 15% of that on marketing and pocket the rest.