How Much Would It Take for You to Give Up Your Health Insurance?

Here's an interesting piece of information I found in the February issue of Money magazine:

25% of people say they'd give up their health coverage at work if their employer gave them $25,000.

Wow. I know it's not a large percentage, but 25% isn't small either.

Maybe there's a seed of an idea here. I can see a time in the future where some employers buy out employees' health coverage as a way to lower costs/limit potential losses.

I'm not sure what it would take for me to give up my health coverage, but it's a lot more than $25,000. How about you? Would you trade your health coverage for $25k? If not, what would it take for you to consider such an option?

Comments

[broknowrchlatr]

Wow. Tough question. I asming this is considderred a 1 time payoff. I would say the number is roughly $75k. That's considerring that you'd have to pay tax on in, knocking it down to say $50k. At a decent return, that could pay for a high deductible plan plus 2-3 thousand into a HSA per year.

[Rob G.]

There are currently many employers that are paying employees to waive their medical coverage. I work for an employee benefits consulting firm that does this for employers all the time. While $25,000 is way too high, many employers will offer $1,000 to $2,000 for employees to waive coverage or have a spouse drop coverage. It can save the employer thousands of dollars if it is implemented correctly. It is important to note that the employee needs to prove that he/she can get coverage elsewhere. Nobody wants them to be uninsured. The idea is to have the spouse's employer or some other plan carry the risk.

[Stephen]

As a healthy 23 employee, I would definitely knock out my health insurance for 25k, as long as this wasn't a permanent, life-long decision. It hasn't been worth the $100 a month I spend on it, as I have yet to use it (8-months now). Yes... I do understand the purpose of health insurance and would probably need it if something terrible happened, but in all honesty, I haven't used any sort of health insurance for the past 4 years!

[MMJ]

$25K is not enough for a family of 4+. Considering that we $4k + $9k from the employer each year, that money would be gone in 2 years. Now what?

[Ryan]

This is a simple calculation for me. $184 per pay period employer contribution now, 26 pay periods.

26*184=4784 per year

Assuming a 5% rate of return, $4784*20 = $95,680 payoff.

As long as they let me still buy the insurance myself through the same plan.

[Gayle]

I am a nurse so I get to meet people who have given up their health insurance on a daily basis. Some never had it, some retired early and counted on their good health to see them through to Medicare age. Some were young and never thought it could happen to them. What it means is that you may never be debt free again. Stephen, that $100 a month is incredibly cheap and would be well worth it for something as simple as a broken bone or an appendectomy. It would be interesting to know how much some of the more routine hospitalizations cost.

[Lily]

Is this because most people aren't aware of the true cost of health care? Give them a list of the uninsured cost of routine procedures (physicals, gynecological exams, etc.), less common but foreseeable expenses (an emergency room visit, x-rays, some blood tests), and worst-case-scenario costs (dialysis, chemo, surgery) - and see if they'll still take $25,000 to ditch their coverage.

Private health coverage can cost $2,700 a year in premiums (http://www.smartmoney.com/consumer/index.cfm?story=20030929), but you'll probably end up paying more if you need procedures done. I would not take a one-time $25,000 payment. $40,000 might cover premiums over the next 40 years, but I'll probably want some extra on top of that to cover the extra I'd pay on services.

[dogatemyfinances]

Sure, 25K is enough for me as a singleton 20s to buy private insurance. But it's not if I actually got sick, aka uninsurable.

[Traciatim]

Wow, I live in Canada, so I pay for my healthcare through my taxes. I do however have two kids so my dental, vision, life insurance, Accident Insurance, Prescription conerage . . . I don't think I owuld trade that for too much. In fact, I was recently at a job interview (just shopping) where they didn't have dental coverage, that's a big turn off. Just think when my kid is 10 and needs braces . . .

Though we don't have to pay for emergency, or regular family medical care, so the decision isn't something like life or death here and it could be down there.

[Tom]

No brainer, take the $25k and use it to get health insurance which is about $1k to $1.2k a month for a family. You could even spend more and get better insurance!

[sandycheeks]

No way!!! People underestimate the value of group medical insurance benefits until something major occurs.

[livingalmostlarge]

No Way.

[Tracee F.]

At this point, I don't know that there is a number that would be a one-time buy-out that I'd take. Obviously, if it were in the hundreds of thousands that would allow me to set up an annuity that would either pay for a top-notch insurance policy in its stead or pay my medical bills, then I'd consider it, BUT... I've just spent 5 months researching the insurance industry as part of an appeals fight for a $75k procedure I need to fix my knee. Private policies are frequently cancelled if you have to use them for expensive treatment, so I'd even hesitate with an option that would let me purchase one. My medications and my husband's run $2400 a quarter (my insurance pays 100%).

So I'm thinking I'd be better off staying with my employer's plan. :-)

[kitty]

Will not give it up. The insurance company can easily cancel individual policy or raise the rates to a very high amount as soon as there is a serious illness. Uninsured pay a whole lot more for the same things - anybody who gets Explanation of Benefits from their plan can easily compare the amount billed with the amount paid by insurance.

An unexpected serious illness - young people aren't immune - can easily run to tens of thousands, even hundreds. Now if I had a few million dollars in savings, maybe I'd be willing to forgo it.

Maybe if I could buy insurance at full price through the same plan, I'd agree to take some money. But the cost of premiums are likely to go up and given super-inflation in healthcare costs is likely to exceed investment returns.

[Matt]

I did it for $250/mo. In exchange, I got an individual plan, which I didn't have to give up when I finally quit working for that horrid company, that remains in effect now that I'm self-employed, and that I can keep in force indefinitely, regardless of any particular employer's whims about personnel decisions. Plus, even before I left that company, my wife and I were able to get treatment from doctors and hospitals near where we lived, rather than having to drive for an hour and a half across the state line to near where I worked, as the company-provided insurance required.

I'm surprised at someone who's so afraid of dependency that they advocate paying off a fixed-rate mortgage with money that could otherwise be invested in high-yielding vehicles, saying that people should allow themselves to remain utterly dependent on their current employer for health care.

When you leave your W2 job, you have the option of paying exorbitant rates to a COBRA plan for 18 months...and then you're out on your butt with no insurance at all. Or you can skip the employer plan, spend the money on an individual plan, and have it be good forever, as long as you keep making the payments.

I have a friend who, because she lives in Michigan, has been trying to find a new job for over seven years, without luck. She'd find new employment in a new area without significant difficulty, but because her current health plan only covers her there and she's not sure she could get approved for a new one, she can't move. She's locked in to a life situation that's draining her dry, because she passed up on the chance to switch to individual insurance when it was offered, and then she got sick.

Even if you foolishly plan on staying at one employer forever, keep in mind that your employer almost certainly doesn't consider itself bound to cooperate. Plan for yourself. Don't depend on them for anything further in the future than your next paycheck.

[F. Morana]

When I was a wage-earner four or five years ago I did, in fact, negotiate away my so-called health benefit. I had already had some experience with the particular benefit for which I was eligible, and the benefit was, in my estimation, nearly worthless.

I relinquished this so-called benefit in return for a "compensation in lieu of benefit," in the amount of $2,500 per annum.

Now I have no ostensible health benefit at all, but if disaster struck, I would, first, make every attempt to seek treatment in one of the more advanced countries, such as India or Thailand, and second, I would cover the expenses by liquidating securities and/or by deploying available credit facilities.

[PatPat]

Heck NO! That is way too little money for my health insurance. Maybe if they gave me $2 million I might consider it.

[aaktx]

Out-of-pocket costs for healthcare are very expensive. A catastrophic illness can wipe you out financially. Health insurance is a worthwhile but costly benefit.

[Aimee]

There is nothing that would make us give ours up. Even a small trip to the ER can cost several thousand dollars, sometimes even with the insurance. I think those 25% have never had any health issues or accidents, and probably don't have a clue as to how much things like that can cost.

[Lord]

Look at what employers pay for healthcare in this country, http://politicalcalculations.blogspot.com/2008/01/average-annual-health-insurance-costs.html
Around $4000 single or $11000 family.

[oimcherry]

Most health insurance plans have a $1m lifetime limit, so that would be my buyout price. No way I'd take $25k. One serious illness or accident and you're in debt up to your eyeballs. No thanks!

[oimcherry]

Lily - $2700/yr is very conservative for a decent healthcare plan.

In CA the avg. decent (HMO) single plan is approx. $5880/yr ($490/mo)and family plans avg. $12k/yr and there are still out-of-pocket expenses to pay even with these plans.

Tom, according to your "no-brainer" solution, the $25k would last about 2 years. Even if it were invested with an 8% return, it still wouldn't last much longer than 3 years. You'd honestly give up continued employer sponsored healthcare for a payout of barely 3 years of premiums?