PETER ROST: PHARMA MARKETING EXPERT WITNESS. AWP, MEDICAL DEVICE EXPERT.: Obamacare: Why it doesn't pay to pay for health insurance

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Obamacare: Why it doesn't pay to pay for health insurance

Why you should never ever pay for health insurance. Unless you're very rich. After all, if you make $500k, tax penalty will be as high as insurance cost. Also, if you make $50k and get obamacare almost for free, do go ahead and pay your share of a couple of thousand.

But if you are an entrepreneur and make between, say $100k and $200k and get no tax credits, paying is not such a good idea and here's why:

First, you will not have to pay any penalty, since insurance cost for bronze plan starts at $15k for family and is higher than 8% of your AGI.  That's for a basic bronze plan with a $12.5 deductible and max which covers 60% of customary and reasonable costs. But since charges are rarely customary you'll probably be lucky if it pays 50% of your costs.

So let's see where that gets us. Let's assume insurance costs never go up and that you'll pay for this insurance for 20 years. That'll cost you $300k. Let's also assume you incur $25 k in medical costs each year. Insurance will cover half, and you'll pay $12.5 out of pocket. Over 20 years that's another $250k. Total bill for you $550k. If you didn't have insurance you would have paid $500k. So what did insurance do for you? Nothing. So you can have healthcare costs of $500k over 20 year and still be better off without insurance!

And if you only have $100k cost, you are $450 ahead of the game. But what if you have $200k cost due to some catastrophe one year? Let's do math. With insurance you pay $12.5 out of pocket. Plus $300k for 20 years. That's $312. Or, if you skip insurance, you pay $200k. You win.

Ok, what's about super catastrophe? Say you end up paying $1 million. And that you have $100k in your bank account. With no insurance, you probably end up paying that $100k and the hospital writes off the rest. Or you declare bankruptcy. You still end up paying much less than if you pay for insurance.

You can really only end up losing big if you actually have $1 million. But the chance of such high costs are probably -- one in a million. So is it worth paying $300k over twenty years to protect against that one in a million chance of losing?

The odds are ridiculously stacked in favor of the insurance company. And that is why, you should never ever pay for health insurance. Unless the government or your employer gives it to you. Or you make more than $500k per year and penalty is as high as insurance.

Of course, it also doesn't help that the lowest cost for a Blue Cross Blue Shield family plan goes from $10k in 2013 in FL to $16k in 2014, due to the Affordable Care Act.


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