I think you are completely wrong about medical insurance being cheaper to pay out of pocket than get the insurance. Perhaps this is true for some horrible 100$/month insurance. But my bills all come with:

list price, plan discount (usually 30-60% off), next what the ins comp. covers = usually 80% of discounted price, then what I pay, that is a small amount, 20% * 60% * original price. I recently had a drug that wasn't covered by my insurance, they wanted me to use the generic. The non-generic was $288/month out of pocket, the generic cost nothing after the insurance paid their part.

on 401ks, i think you might have more of an argument about costs, but since we don't have an alternative, it would lead to many people having no retirement. there's no law that makes people use 401ks instead of private retirement.

On the whole medical insurance is more expensive than paying out of pocket, otherwise the insurance companies would be losing money and wouldn't exist.

Insurance companies have a built-in asymmetry of information and bargaining power compare to you, and most areas have a monopoly or near monopoly of health care services, such that it is possible to pay more out of pocket than if you had insurance, even if you had the float.

Consider two populations: insurance companies which can negotiate effectively because they know the true cost, and uninsured people who do not know the true cost.

Let's suppose the true cost is $10, but the hospital charges $30. The insurance companies negotiate beforehand to only pay $11, allowing 10% profit. The hospital likes this. The insurance company takes in enough to cover those costs, so it's also happy.

Think also of the person with insurance, who gets the "bill" for $30 and the note that it's been paid by the insurance company. Looks great, yes?

But now think of the person without insurance, who gets a bill for $30. Do they accept the price, or negotiate to lower it? Some will just pay. Others might negotiate it down to, say, $25 - a 33% savings! But to the hospital, that's $10 in profit.

And if the bill uses medical codes and abbreviations that you don't know, then that's more wasted time trying to get up to speed to understand what it is you are negotiating. While the insurance company has an economy of scale.

That's not true.

"Float, or available reserve, is the amount of money on hand at any given moment that an insurer has collected in insurance premiums but has not paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest or other income on them until claims are paid out." https://en.wikipedia.org/wiki/Insurance

Additionally, Warren Buffet discusses this in fascinating detail over the course of almost 40 years. http://www.berkshirehathaway.com/letters/letters.html

Nothing you said makes my statement untrue.

Pardon if I misunderstood, or misinterpreted your post, but you seemed to be saying that premiums must be more than the claims or they wouldn't/couldn't be in business. That is not true.

Even if an insurance company has claims greater than its premiums it could exist, and even be profitable, because of its ability to earn additional revenue through investing its float. You seemed to omit this consideration, which is significant because investment returns on billions of dollars can be significant.

This argument hinges on counting the time value of money for insurers but not their customers. The investment money made on float would instead have been made by the customers if they didn't buy insurance.

I think you're correct in a very specific technical sense (measuring in nominal dollars, that is), but not in the sense that matters in the real world.

Not really. Each individual customer requires much higher liquidity than the insurance company does - it's fairly likely that you'll have to spend your entire medical fund unexpectedly, but incredibly unlikely that every single insurance customer will need to claim at once. Also, investing is a lot more inefficient at small scales.

Assuming we have a business that makes money on investment and loses money on selling insurance, why would it continue to sell insurance?

Because that's where it gets the money to invest in the first place...?

Well, at that point they're basically turning over a loan again and again. I'd thought they could walk away and keep the money, but I now see that if the insurance truly was unprofitable, they'd be left with nothing by the time the last day covered by their insurance ended.

You're ignoring the fact that self-insured people can invest their own "float".

I have insurance strictly for the emergency room. year over year my deductible and monthly rate have gone up.

I'm more bothered by doctors refusing to charge without insurance. My pcp used to charge 120 a visit, then they went through my insurance. Because I hadn't met my deductible the payment was now 650. I've seen pretty much every facet of medical care go up.

I'm not the healthiest, several neurological issues. But I'm primarily treated by eastern medicine. None of which is covered by my insurance. The budget I allocated for my treatment is now allocated to an insurance I use.

I was in a bike crash a couple of months ago without health insurance. The total was ~$4500 for urgent care on a Sunday, or about 10 months of ACA coverage.

The whole point of medical insurance is to hedge against the risk of medical expenses.

If you're a relatively healthy person, of course insurance is expensive. If you're someone who needs monthly prescriptions, multiple operations, or frequent emergency room trips, it would be absurdly expensive for you not to have insurance.

That's why I said 'on the whole'.

Long-term insurance business is losing money. It only exists as small insurance companies can re-insure with bigger ones and the biggest get state support.

Also consider that paying out of pocket has transactionall cost and it could be that on average it is cheaper to pay through insurance company.

> list price, plan discount (usually 30-60% off), next what the ins comp. covers = usually 80% of discounted price, then what I pay, that is a small amount, 20% * 60% * original price. I recently had a drug that wasn't covered by my insurance, they wanted me to use the generic.

Can you please read/watch linked sources before commenting? The videos go into detail about "plan discounts." tl;dr - it is basically the same trick as the "50% off sale!" in retail.

I actually tried to pay 100% out of pocket instead of using insurance.

Some procedures may cost comparably if you immediately pay 100% in cash, but these are few (of what I asked).

Some medicines may cost comparably, but prescription medications usually cost so much higher it's not even funny, e.g. $100 co-pay vs $550 out of pocket.

That all great if your only visiting quick care places for minor issues. Wait until your getting a CT scan or a stay in the hospital and let's see how that cash payment works out. Insurance is a gamble regardless, but medical costs are out of control and getting worse.

My point exactly. Cash payment is a pretty dubious option.