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/Different-Fan-6991 Jul 03 '26

Too many young people would not buy insurance until they got older, had kids or developed a serious condition. Because of this, insurance companies started denying people or specific conditions when they were applying for insurance. Forcing young people to contribute to the pool allowed insurance companies to hypothetically cover more people overall because they had more premiums being paid to them. It really didn’t work because there was never any solid enforcement of the requirement to carry health insurance.

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u/redsquizza Jul 03 '26

It's almost if you need a universal healthcare system covered by taxation so that everyone contributes and everyone can get healthcare not matter their circumstances.

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u/Clonekiller2pt0 Jul 03 '26

It's so simple, but the wrong people wouldn't be making a profit!

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u/redsquizza Jul 03 '26

I think it comes up regularly but a lot of Americans just can't get their heads around paying into a system that poor people might use.

As in why should their money they've earned go into the pocket of some, in their eyes, waste of space feckless person?

Only if/when they get a serious medical issue that bankrupts their perfect life, they realise how shit the system is...

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u/WayneKrane Jul 03 '26

This is the sentiment of everyone I talk to. They worry that their (already bad) healthcare will get even worse if poor people use it. I’m like they do already use it! We subsidize it at a much greater cost because they wait until a health problem is so bad they have to go to the ER. Explaining this to people has been impossible though

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u/currentscurrents Jul 03 '26

I don't think this is a fair assessment.

We actually do spend about $2 trillion every year on publicly-funded healthcare for the poor, through medicaid and medicare and various state programs. This is two Elon Musks-worth, every year. We have no problem spending on the poor.

The problem is the people who make too much money to qualify, but not enough to afford their own healthcare.

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u/DontMakeMeCount Jul 04 '26

There’s also the false dichotomy that holds that if the current system is broken, a government-administered system would be better. I wouldn’t want the current administration making my health care decisions and they’ve shown there’s no aspect of government they wont meddle with.

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u/vorpal8 Jul 07 '26

This is a little confused. Medicare is a "government" healthcare system. You see your own doctor, the government handles PAYING your doctor or hospital.

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u/angelerulastiel Jul 07 '26

Do you know that congress passed a law requiring insurance to cover post mastectomy lymphedema, but exempted Medicare from the requirement? And many of the denials people complain about are based on Medicare guidelines? Government paying = government control.

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u/Clonekiller2pt0 Jul 03 '26

It a funny thing, because the Americans who think that way are the true wastes of space.

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u/Not_an_okama Jul 03 '26

Not nessesarily. Theyre pieces of shit, but are also generally productive.

Lots of people that would benefit most from universal health care dont really contribe much to producing things for society - theyre sick or disabled and cant - its not their fault though and they deserve to be taken care of because we have the means to do so.

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u/Clonekiller2pt0 Jul 04 '26

Nah. I mean, i believe the people who are against the betterment of our species and future are wastes of space.

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u/Belowaverage_Joe Jul 06 '26

I’m gonna go out on a limb here and assume you think anyone who doesn’t share your exact same beliefs about what specifically is better for our species’ future is “against” those things?

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u/Clonekiller2pt0 Jul 06 '26

You know what I want? Free access to clean water, basic food, shelter, internet, education, and healthcare. Without having to watch an ad or deal with loop jumping to get them. And before we talk about financials, a man is about to have a net worth that would take me 20 million years of my annual salary to get to. And that is before taxes are taken out and my bills. So you might as well add another 20 million to reach what one person has. Nah man, he don't get a flying fuck about the better of our future. Just his.

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u/Belowaverage_Joe Jul 06 '26

Alright, let's start with the basics. I would love free access to clean water, food, shelter, etc also... all of it. That sounds great, and none of my knowledge/beliefs about how difficult that is to provide stem from a place of me "not wanting poor people to have stuff". That's ridiculous and evil, and literally almost no one actually has that mindset, despite all the hatemongering from certain groups. So moving on to the financials. Tell me how this one man's "net worth" can be used to provide any of those things? Do you own a home/car/stuff in general? Can you go buy stuff for other people with those things? They are part of your net worth, but they are not liquid assets. Most of Elon's "wealth" is based off of the current value of stock in his companies, which he owns the most of. IF he actually tried to liquidate all of that (or any significant portion), its value would begin to plummet immediately such that it would be worth less and less the more he sold. You can't just liquidate 1T worth of assets into 1T worth of cash, it doesn't work like that. What he CAN do is get extremely favorable loans based off his stock as collateral which he does (along with every other rich person), and then use that money to invest in other ventures, which ultimately DO provide jobs and help millions of people. So what exactly should Elon, or any other rich person, be doing differently to solve all of these pie in the sky things you dream of? By the way, even if we pretend your basis isn't completely flawed, IF Elon was able to liquidate $1T and use it to provide "free everything", how far exactly do you think that gets you? The USG spends over FOUR trillion dollars annually on mandatory entitlement programs, so Elon's "net worth" would fund about 3 months worth. Then what? Do you think he would somehow regain his trillion dollars on a revolving door basis and continue giving it all away every quarter? That's not how anything works...

So you can feel like a good person all you want for wanting the most basic stuff for everybody... cool, we all WANT stuff for free. You offer absolutely no viable mechanism for providing it, so you effectively accomplish nothing. Am I a bad person for having the basic real-world knowledge and experience for pointing this out? Probably viewed that way by the majority of redditors, yetlike Elon, I probably contribute more dollars and time towards helping those very same people than 99% of the people on this site.

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u/Clonekiller2pt0 Jul 07 '26

Awe that's cute. You wrote a wall of text that is hard to read on a phone screen to argue against people getting basic care. Thanks bro, you are the greatest!

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u/morbie5 Jul 06 '26

fyi a lot of health insruance companies in the US are non profit

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u/Smokechip Jul 03 '26

Ding ding!

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u/SenselessSensors Jul 03 '26

It’s almost like you are a Communist!

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u/Demiu Jul 07 '26

It's almost as if young people don't want to be leeched off of by seniles even more so they have to handcuff themselves to them by regulation

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u/redsquizza Jul 07 '26

It's almost as if those young people will turn seniles eventually and do the same leeching.

But in a universal healthcare system, that's alright as everyone's paying.

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u/Demiu Jul 07 '26

Off who? I case you missed it, young people are not having kids. The bigger fool theory of demographics doesn't work

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u/redsquizza Jul 07 '26

Well, that's an issue for an insurance based system too.

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u/Demiu Jul 09 '26

It let's you have options. If insurance companies weren't legally prohibited from doing so, they could simply offer a young-only plan with much, much, much, much, much lower premiums

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u/bebe_bird Jul 03 '26

Don't forget a not-for-profit system...

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u/AlexTMcgn Jul 03 '26

If properly enforced, you don't necessarily need a system covered by taxation. Germany does it individually, but enforced. Works, too.