Is health insurance a scam or does it offer real benefits?
Many people have come to believe health insurance is a predatory scam. While that might not be fair, it is totally fair to be frustrated because you aren't getting value for your money.
People pay for health insurance in exchange for two main benefits:
- Covered healthcare expenses
- Discounted prices
It turns out health insurance isn't very good at providing either of these benefits. For most people, it won't cover their expenses. And generally, it doesn't secure special prices. It isn't a scam, because it's definitely useful in cases of catastrophic illness or injury. But for most people, there is a much better option.
You usually have to pay out of pocket, even with insurance
Your health insurance won't help cover your healthcare expenses until you've reached your deductible. But most insured people don't reach their deductible. (In fact, most insured people can't afford their deductible.) So most insured people pay out of pocket for all their healthcare.
Plus, there are many other circumstances where you will pay out of pocket even with health insurance:
- You want to use an out-of-network provider.
- You want a non-covered medication or service.
- You want a service more frequently than is covered (like a weekly mental health appointment).
- You exceeded your annual or all-time coverage limit.
When you are paying out of pocket, prices matter. You want the lowest prices you can get. Health insurers usually claim they have negotiated hugely discounted prices for your benefit. But are these negotiated prices your best option?
Insurance prices are not good prices
Healthcare providers and insurers like to play a game. Healthcare providers win by getting huge price increases, because they want to bring in more revenue. Insurers win by getting huge discounts, because they want to make their product more valuable. And year after year, both sides win. So what's their trick? It's actually very simple: healthcare providers deliberately inflate their "chargemaster" prices far beyond what is commonly paid.
Massively inflated list prices allow plenty of room for healthcare providers to raise prices and for insurers to "negotiate" huge discounts. They both get to win. The funny part is, the hugely discounted prices aren't very good prices. They are usually what is commonly paid.
Insurers aren't actually special – they are the status quo. Around 90% of healthcare is priced at payer-negotiated rates. These payers tend to be similar, and tend to get approximately the same discounts off the inflated "chargemaster" prices. So the vast majority of the market is paying these same "discounted" prices. By definition, that means they aren't truly discounted prices – they are ordinary market prices.
This all assumes your health insurance plan is attached to a network of providers with discounted prices. Unfortunately, "some plans don’t have networks at all". Further, health insurance plans generally don't cover all services – and anything not covered has "usually not" been negotiated. So there are circumstances where insured people aren't even entitled to ordinary market prices – they are exposed to the inflated prices.
There is only one way to consistently pay below-market prices, and that requires paying without the "help" of an insurer.
How to get below-market prices on healthcare
To get different results, you must take different action. When 90% of healthcare is paid with the involvement of a third-party payer, the way to be different is to pay without one. That might sound crazy because prices are so high. But by paying out of pocket, you can negotiate real discounts – prices that are substantially lower than market rates.
Incredibly, paying out of pocket gives you more negotiating power than a big insurance company. That's because paying out of pocket is much simpler than paying through insurance. Healthcare providers hate the insurance hassles of codes, claims, denials, delays, etc. They love getting paid directly and immediately. In exchange, they are generally willing to offer their best price. But there is a catch. You can't just ask for their best price.
Most healthcare providers offer a standard discount for people who pay out of pocket, and it's not very good. It's usually around 15% off chargemaster prices. Insurers get around 50% off chargemaster prices, meaning they do much better in spite of being much more difficult to work with. If you want to get truly competitive prices, you can't just walk in off the street. You need to be part of a network that has already secured them for you.
Pocketero is a non-insurance network for patients who pay out of pocket for healthcare. It ensures you get a provider's best price when paying out of pocket. For everyone paying out of pocket for healthcare – and most people are – Pocketero is the best way to keep your money in your pocket.