At What Net Worth Should I Consider Self-Insuring Instead of Using ACA Health Insurance?

A Reddit user is retired and fed up with the health insurance he’s buying. He has a $13 million liquid network and $3 million in real estate equity. He’s 55 and his wife is 56, and they’re spending around $400K per year but expect to be down to $325K after his two kids graduate from college. 

Since he and his wife are both retired, they are stuck buying individual health insurance on the open market, which he said is truly awful.

He’s paying $30K in premiums for a family of three on a policy with an $18,000 deductible, and he just doesn’t think he is getting much value for his money. Since he is tired of paying for “nothing,” he’s wondering if his net worth is high enough that he should just self-insure.

So, is that a good idea? 

Self-insuring almost never makes sense

Multiple Reddit users were very quick to point out serious problems with the OP’s plan. Some of the issues raised included:

• Difficulty getting appointments without having an insurance provider, as some offices want to make sure you are covered before they will offer care
• Inflated fees since you’ll have to pay the non-negotiated rates. Insurers often negotiate a lower pay rate, especially with hospitals, where the “chargemaster’ will spit out very high fees for even the most basic of services. If you’re paying cash, you might be able to negotiate a cash discount, but since the OP has substantial assets that care providers could go after, it’s very possible that he’d be expected to pay full (inflated) prices
• The potential for huge out-of-pocket expenses. One Reddit user said a very simple surgery cost his insurance company $80,000, while another said that their mother’s cancer had cost $2 million to treat and she didn’t even survive it.

The reality is that going without health insurance is a huge gamble no one should take — especially not someone with a huge net worth that could lose everything if they incur high bills and care providers try to collect the funds. 

With insurance, you’re paying a predictable (albeit high) price for coverage, but your out-of-pocket spending is capped. Without insurance, you could easily blow through millions quicker than you imagined with one serious illness. 

Shopping around for coverage could be a good idea

Several Reddit users suggested that the OP shop around for coverage options, as his high deductible health insurance plan may not be the best deal, given that some bronze plans are offered at affordable rates and provide decent coverage. 

A financial advisor may also be able to help the OP explore other options for finding affordable coverage, such as joining professional organizations or groups that might help members get discounted coverage or even get access to a group plan, which generally tend to be much better than individaul health insurance plans in terms of both cost and coverage.

By looking at the big picture and exploring all possible solutions, the Reddit poster can make sure he’s getting the most value for his money — but going without any insurance at all is definitely not the right way to do that.