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I was wondering if the very rich carry health insurance or if they are "self-insurred."

Suppose we were able to put aside $500k now which would be our family "health insurance fund" and then when this grows to $3M, cancel our health insurance policy and become self-insurred. I was wondering if the very wealthy actually play the game of paying insurance companies a premium to be insurred. In other words, at what point does it make sense to become self-insurred for medical. Especially if we consider ourselfs very healthy.

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Whether the "rich", whomever they are self-insure is hard to tell; though I suspect many rich do buy insurance even though they shouldn't. However, whether you should self-insure anything (medical, various car coverages, home coverages, life, long term care, disability, etc.) is easy to figure out.

The purpose of insurance is to eliminate the (downside financial effect of the) POSSIBLE; not the probable. Actually, over a long enough time period all events are probable and some are even certain. Thus, the question is easy: assume the event is a certainty. Will the occurence of the event be: (1) financially ruinsome; (2) financially difficult; (3) a financial irritation; (4) just another bill to pay?

I would suggest most people should cease insurance somewhere between (3) and (4) however, bigger risk takers might move into the (2) category whereas as emotional reisk avoiders might need to be solidly in (4).

Probably medical might be the most difficult to figure out as it is open-ended; e.g the expenses can go on and on and never seem to cease. Thus, one could argue that you just can't get to category's (3) or (4). However, a clear case can be made for purchasing major medical only (the equivalent of a catastrophe coverage) that does not kick in until $5,000 or $10,000 or $20,000 of incurred expense.

Interestingly, this is how medical insurance was sold in the 50's & 60's and most employees actually had two or three policies: a comprehensive policy (1st dollar coverage with deductibles) and a major medical policy ($20,000 to $1,000,000) and medical excess policy ($1,000,000 to $5,000,000 or unlimited). The later two policies were quickly merged into one in the mid-sixties & the comp was merged with the major med by the early seventies.

Nowdays, its darned hard to find a decently priced major med; e.g. a medical policy that kicks in at $10k or $20k because the insuruers don't like writing it because of the low premiums & they then don't control the underlying service.

TheBadger





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methree asks,

I was wondering if the very rich carry health insurance or if they are "self-insurred."

Suppose we were able to put aside $500k now which would be our family "health insurance fund" and then when this grows to $3M, cancel our health insurance policy and become self-insurred. I was wondering if the very wealthy actually play the game of paying insurance companies a premium to be insured. In other words, at what point does it make sense to become self-insurred for medical. Especially if we consider ourselfs very healthy.


I have an amazing little anecdote on this very subject.

When Steve Jobs returned to Apple Computer as CEO he worked for $1 per year. He came under intense scrutiny by the press since this was a very unusual arrangement. Many feared he had some hidden agenda that might hurt shareholders.

One reporter asked, "Why work for $1 per year. Why not work for free?"

Steve Jobs responded, "I have to draw a salary of at least $1 per year to be eligible for company health insurance for my family."

So there's at least one multi-billionaire who feels he needs health coverage and is unwilling to self-insure.

intercst

PS, The $1 per year ploy eventually paid off. The Apple board of directors recently gave Steve Jobs a $50 million Gulfstream V business jet as a token of their appreciation.
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I was wondering if the very rich carry health insurance or if they are "self-insurred."

Whats your idea of rich? I can't tell you how many times I have been stiffed or they have argued about my fee. I am talking about the mega rich.

My opinion is that most people should carry a high deductable policy ($2500) and pay for most things out of pocket. If you can look into a Medical Savings Account.

For instance, a 44 year old can get a $2500 deductable
PPO for $123.50/month. It has a $5,000,000. Lifetime max. I'll bet thats twice most group max. Setup a MSA and pay the $2500 deductable with pre tax $.




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One reason to have health insurance is to avoid paying retail. The insurers get big discounts. I remember reading about particularly unscroupulous insurer that was paying the provider at discounted rates but using the retail rate to calculate what the insured owed for copayments.

Philosophically, I would prefer to have a huge deductible and pay most of my expenses out of pocket. As practicle matter though, being in a PPO or HMO plan probably makes more sense.

If you were seriously rich, you would probably use doctors who weren't in any plans. So all of the above wouldn't matter and what the hell, you are seriously rich and can afford the best.

Regards,
Baanista
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Anes wrote,

<<<<I was wondering if the very rich carry health insurance or if they are "self-insurred."

Whats your idea of rich? I can't tell you how many times I have been stiffed or they have argued about my fee. I am talking about the mega rich.>>>>>


What kind of fee were you charging? Was it "reasonable and customary?" Was it anything close to the discounted fees many doctors offer HMOs and other managed care firms?

My opinion is that most people should carry a high deductable policy ($2500) and pay for most things out of pocket. If you can look into a Medical Savings Account.

I actually looked into an MSA account and decided against it. (There's a reason these things aren't selling as well as the Republicans had hoped.) With an MSA, you end up paying "retail" for your medical needs rather than the discounted "wholesale" costs that a HMO pays. Unless you are willing to negotiate with your doctor to obtain a discounted fee, an MSA may actually cost you more. (Who knows, maybe the reason Anes mega rich patients were arguing about the fee was BECAUSE they were in an MSA. <grin>)

For instance, I had some non-cosmetic plastic surgery done on my eye two years ago. It was about a 30 minute procedure done under local anesthetic. The plastic surgeon billed $2,650 for his time. The insurance company paid him $635 under their PPO (preferred provider plan) contract. Under the terms of the insurance company contract, the doctor can't come after me for any of the $2,015 difference. If I was in an MSA, I would have ended up paying the $2,650 myself, unless I was as skillful as the insurance company negotiators in securing a big discount.

intercst



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What kind of fee were you charging?

The most I can get + 10%! I discount
my services like everyone else. They just stiffed us.
It was a cash deal, no insurance involved.

The insurance company paid him $635 under their PPO (preferred provider plan) contract. Under the terms of the insurance company contract, the doctor can't come after me for any of the $2,015 difference. If I was in an MSA, I would have ended up paying the $2,650 myself, unless I was as skillful as the insurance company negotiators in securing a big discount.

You can setup an MSA with a PPO for your insurance.

Best wishes,
and thanks for a great board and your time devoted to it. I LUV YOU TO MAN.

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Anes wrote,

You can setup an MSA with a PPO for your insurance.


That's very good news -- as long as the PPO discounts apply to your $2,500 MSA deductible.

I didn't find any MSA PPO plans when I looked at this a few years ago. Perhaps you can post the names of any insurers you know of that provide this product. I'm sure many readers of the Retire Early board would be interested.

Even I'm learning something from this board. <grin>

intercst
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PS, The $1 per year ploy eventually paid off. The Apple board of directors recently gave Steve Jobs a $50 million Gulfstream V business jet as a token of their appreciation.

Not to mention those 10 million shares of Apple !!!
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I didn't find any MSA PPO plans when I looked at this a few years ago. Perhaps you can post the names of any insurers you know of that provide this product. I'm sure many readers of the Retire Early board would be interested.

Conseco and Golden Rule were the two I looked into.
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Looking at the Golden Rule website ( http://www.goldenrule.com/ ) it looks like the MSA is coupled with major medical only. Although gr offers ppo coverage, it seems to be for non-msa accounts. Having to pay the "retail" rates seems to be a significant disadvantage of MSAs.
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