Hipster Health Insurance 101: Advice For When You're Getting the Short End of the Stick

Hint: You overpaying so old folks can underpay is not how all insurance works.

Boomersteve.wilde / FoterPssst. Hey, Millennial. It's me...Uncle Boomer. Can I come down? Your Mom said you'd be in the basement. "Junior's Subterranean Penthouse," your Dad called it.

Almost Happy Birthday. 26 years old! Whatcha doing? Watching Healthcare.gov grind away? Sweet! Oh yeah. No more parents' health insurance for you. The Affordable Care Act (ACA) says you're a big boy now.

So how much will that "affordable" (wink-wink) policy set you back?…WHOOOOOA!…The deductible? O...M...G! So much for that iPhone you've been saving up for since you dropped your last one in the deep-fryer at work. How much is your student loan payment per month? Ooooh. Well, maybe you can find a used brick or burner to serve your telephonic needs. (If you choose the burner option, you might want to be careful who you buy it from.)

Bummed? Well, the ACA does require 26-year-olds to way overpay for insurance so 60-year-olds—like your parents and me—can way underpay. You say you understand why? Seriously?

Ahhh. Dad explained it while you helped him shop for organic, locavore, free-range tempeh. "That's how all insurance works," Dad said. "Lucky people with low expenses pay lots so the insurer can pay lots to unlucky people with high expenses. It's that way with all kinds of insurance. You're lucky to be young, with few medical expenses. I'm unlucky to be older, with worn-out knees from marathon-running."

And you believed him…OK. Your Dad means well. But he doesn't know squat about insurance. You overpaying so he can underpay is not "how all insurance works." You need a little education, Sparky.

The Skinny on Insurance

HipsterChristopher MichelTwenty-six-year-olds who own 1,000-square-foot fixer-uppers don't pay the same homeowners insurance premiums as 60-year-olds with 10,000-square-foot McMansions. "One day, you'll be 60 years old with a big house" doesn't imply, "so pay big bucks now to subsidize unlucky me and my grand digs." But that's Dad's argument about health insurance.

Twenty-six-year-olds pay way less for life insurance than 60-year-olds. That's because there's next-to-no chance the 26-year-old will die soon, while there's a reasonably good chance the 60-year-old will keel over one afternoon while eating potato chips and watching TVLand. That's not "lucky" versus "unlucky." That's just "young" versus "not young."

In a big life insurance pool with young and old, healthy and sick, what's effectively going on is this: Healthy 26-year olds pay low premiums so when one of them dies, the many lucky ones (the breathing) pay a benefit to the family of the few unlucky ones (the not-breathing). Similarly, the 60-year-olds in the pool pay high premiums to pay benefits to the quite-a-few unlucky ones' families. The 26-year-old who buys inexpensive life insurance and then becomes unhealthy continues paying the healthy-person premium because he was cautious and decided to buy when he was healthy. That's cautious, not lucky. On paper, they're all mixed in one big pool, but it's really a bunch of separate pools, each with its own payouts and premiums.

No one says a healthy 26-year-old should subsidize the life insurance for the 60-year-old because 26 is lucky and 60 is unlucky. No one says young fixer-upper-dwellers should subsidize old McMansion magnates. But that's exactly what your Dad says about health insurance. 

Think about this while watching Healthcare.gov's error messages spinning round and round.

Believe!

Here's the real problem. Mom and Dad and I and all our friends didn't believe anything our parents told us. Boring old World War II/Great Depression stories all day. Yadda yadda yadda. We did what we wanted. Lived for the moment. Abused our bodies. Didn't save. And we did OK. How? Most of us slid into an economy loaded with the wealth our boring, hard-working parents had created. We had a half-century partaaay.

You, Millennial—you and your crowd believed everything Mom and Dad told you: "Ivy League is a must...Borrow the money...Top schools get you where you want to go...College is the time to explore your own mind and have fun...Major in whatever interests you—not in what interests other people."

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  • Suellington||

    Great piece. It's been funny watching the proggies somehow deny that the whole VA debacle is not a preview of gub run healthcare. It is almost a religious belief in the power of the gub that they possess.

  • Akira||

    Whaddaya mean, "almost"?

  • Suellington||

    I learned today from a proggie that the problem with the VA was that they were copying the private sector too much. They should be instead followin tried and true gub methods to gain efficiency.

    "IAmThatGuy Rank 104
    @reciprocator_2

    Yeah, I didn't think that some of you wouldn't get it.

    You see the managers were being paid for performance just lie they do in the private sector. The performance was the reduction of wait times for those seeking service. to meet the performance objectives so the could receive their bonus the managers set the service request time to a day or so before the appointment time regardless of when the service request was made. So, rather than fixing the problem so they could receive their bonus they cooked the books. Pay for performance is very common in the private sector and is usually tightly monitored for corruption. But we are dealing with government entities so how much oversight do you think happened here?

    What they did was criminal. I was glad to hear that all performance bonuses have been cancelled. What was don here is criminal and all involved with cooking the books need to be prosecuted.

    So while you are LYAO at least 40 vets may have died as a result of this pay for performance debacle.« less"

  • Agammamon||

    Which is why its interesting to watch PB push for ACO's - which are just another organization pushing abusable metrics for healthcare providers to cook.

  • Dweebston||

    Yeah, I didn't think that some of you wouldn't get it.

    That about sums up how well he understands the VA fiasco.

  • sasob||

    They should be instead followin tried and true gub methods to gain efficiency.

    Like what - burning babies?

  • Swiss Servator, CH yeah!||

    Drones.

  • Suicidy||

    Simple solution to most of our problems. All progressives must be struck down. They're just soulless things anyway. Like furniture, but without the connotation of value or utility.

  • Chumby||

    If you like the secret VA waiting list you are on, you can keep being on the secret VA waiting list you are on.

  • Hugh Akston||

    That's a good picture of Welch.

  • Swiss Servator, CH yeah!||

    ZING!

  • Dweebston||

    The 26-year-old who buys inexpensive life insurance and then becomes unhealthy continues paying the healthy-person premium because he was cautious and decided to buy when he was healthy.

    Why are you poverty shaming, Rob? Poor people can't make smart decisions about their lives because they're poor. They're so dumb and poor that society needs to look after them, and make intelligent choices on their behalves. So you shouldn't shame these stupid, dumb, poor animals for being incautious, because really, it's only because they're ignorant halfwits with no capacity to care for themselves.

    Show some tolerance, man.

  • EDG reppin' LBC||

    So the youth of today are paying for oldsters of tomorrow's healthcare? Nice racket.

    Speaking of Youth of Today: Youth Crew

  • Dweebston||

    Speaking of racket.

    I kid, I kid.

  • Ted S.||

    Not to be confused with the U-Krew.

  • x4rqcks3f||

    No one says young fixer-upper-dwellers should subsidize old McMansion magnates. But that's exactly what your Dad says about health insurance.

    The standard reply will be that buying a McMansion is a choice, unlike aging. If you believe that society should be forced to help the unfortunate (i.e. you're evil), then the choice/non-choice argument makes sense.

  • Dweebston||

    I think the idea is that a McMansion represents the accumulated wealth the older generation possesses, as a function of years in the labor force, relative to the inexperienced young only just getting their foot in the door.

  • Brian D||

    But I was told all old people are destitute and would have to eat cat food if they weren't allowed to reach into my wallet each payday!

  • Dweebston||

    I was told Social Security already fixed that by providing a guaranteed income to people who had worked their entire lives. So which is it?

  • EDG reppin' LBC||

    More like Social Insecurity.

  • Dweebston||

    You preparing for a gig, EDG?

  • Plàya Manhattan.||

    Cat food? Paging Grey Panther.

  • Agammamon||

    Why, its *both* Winston.

    To know and not to know, to be conscious of complete truthfulness while telling carefully constructed lies, to hold simultaneously two opinions which cancelled out, knowing them to be contradictory and believing in both of them, to use logic against logic, to repudiate morality while laying claim to it.

  • sasob||

    In other words: to have a zero for a mind?

  • Libertarius||

    In other words, the philosophy of Hegel.

  • John Galt||

    This probably isn't the best time to bring up Chuck Hegel's philosophy.

  • John Galt||

    Maybe FICA taxes just go into the general pot which pols use to gain reelection, enrich themselves, their families, friends and favored lobbyists and it was never expected to be there forever anyway.

  • UCrawford||

    That's usually the point at which I ask them if *their* grandparents were so poor that they could only afford cat food.

    If the answer is yes (which it never is), I'd then ask them how much money they sent to their grandparents. If the answer is no, I ask them how many canned food drives they've worked on to fix the problem. The answer is usually also none, at which point I begin shaming them for expecting the rest of the world to foot the bill for their laziness. Usually works like a charm.

  • sasob||

    The standard reply will be that buying a McMansion is a choice, unlike aging.

    Aging isn't a choice? What - someone has a gun at their heads forcing them to go on living?

  • Bill||

    Well, they could sell or borrow money on the house to pay bills so property insurance is not as good of an example as life insurance.

    Progs think the rich should be paying really high rates for Bama-Kare and that the youngsters are payin high rates to help the poor and uninsured.

  • NFP||

    Millenial here (25). Unfortunately most people my age don't seem to realize how badly we're getting screwed over by our elders. Obamacare is small potatoes though, I'm waiting for the impedding social security disaster: http://youtu.be/fbgIiAnpcPc

  • jdgalt||

    The old already have a canned answer to that: just raise the Social Security tax. They just don't get the fact that the general tax level is already above the hump in the Laffer curve.

    Another 10 years of this and the government will have so destroyed the economy by overtaxation and overregulation that their only way to fund more welfare is to print money. Congratulations, we are now a banana republic! This is exactly how all of Latin America got that way, so there's no excuse for not seeing it coming.

  • newshutz||

    They are printing 1T dollars a year now.

  • wwhorton||

    I've got about ten years on you. When I was your age, I was working at a bookstore and going to college part-time. Work offered health insurance, but I couldn't afford the premium AND pay rent and bills. The money I would've used to do it with went to, you guessed it, FICA and taxes. Of course, I got almost all of the income tax refunded, but as anyone who has ever been living paycheck-to-paycheck knows, you need that money RIGHT NOW, not in April.

    It galls me to no end that I pay for Social Security benefits that are going to Warren Buffet, a plutocrat who benefited from government cronyism and yet has the gall to say that I'm not paying enough in taxes.

  • NFP||

    Took me about a full year out of school to find work (granted I was the dreaded liberal arts major) but have done well for myself (as a project manager) once I got my foot in the door. Student loan payments are basically eating up what I could afford to save for a house and fica/social security eat into what I would spend towards my 401k. I'm just starting to get ahead so I can't complain too much compared to many of the people I know. If my employer didn't pay for my health insurance as an individual I probably just wouldn't carry it for now.

  • MJGreen||

    I'm 27 and my situation sounds similar. Been at my job for nearly 3 years now, and only with a recent raise am I making enough to start putting some away in an IRA. But I've so far gone without insurance. Our company's insurance is actually renewed starting this week, so I was asked again if I wanted to take part in it. But the premiums would eat up that recent raise, nearly me putting me back into the red.

    Get rid of FICA, Medicare and my state insurance taxes, and I could afford a health plan.

  • Mt low rider||

    Why should it gall you that Warren Buffet gets social security (if he actually cashes the check)?

    That is the egaitarian nature of FICA. It was stupid then and stupid now as the assets that the government controls and invests in have substandard returns that are robbing all people of your generation.

    Bush was right in proposing privatization of social security, he was a hack on many levels but he was right on this.

    Who would you rather control your retirement, private parties who will only be sucessful if they make you money or the SSA which is an utter failure on the verge of bankruptcy.

    I'd argue you are far more able to direct your retirement money than the fucking government.

  • Harvard||

    [Unfortunately most people my age don't seem to realize how badly we're getting screwed over by our elders]

    Unfortunately most people your age don't seem to realize you're getting screwed by your government, and so are your elders.

    When you smarten up you'll become part of the solution.

  • NFP||

    Video I posted is quite long but if you've got the time worth watching. Net transfers to Boomers are through the roof compared to those my age historically. Sure that's the government but it's also the boomer age demographic voting for that government as well.

  • Homple||

    What Harvard said. The "elders" didn't pass Obamacare, the Democrats did.

  • ||

    Considering the average of confessional democrats is 60 years old, I'd say they're practically everyone's "elders".

  • ||

    There should be an age and that should be congressional. Fuck you autocorrect.

  • TopherB||

    Don't forget the $150,000 debt you were handed at birth because your Government spent money it didn't have to appease its people and accumulate its power.

  • Death Rock and Skull||

    I'm not paying that. Whoever lent that money in the first place is a sucker who can suck my balls.

  • Brett L||

    Here's my quibble with the whole thing... maybe Boomers should stop patronizing people we want to act like adults. Even as the hook to a pretty good article.

  • ||

    It's unfortunately that most people don't understand statistics, which allows them to be so easily suckered by the "that's how all insurance works" bullshit.

    Not all risks are uniform. Some people have a 1% chance of getting cancer. Other people have an 80% chance of getting cancer.
    Trying to fit people into binary "lucky" and "unlucky" categories is misleading. You may be "unlucky" to get cancer if you're in the 80% group, but you are not NEARLY as unlucky as if you were in the 1% group.

    How insurance really works is it pools all the 1% people together, and charges them a low rate, and pools all the 80% people together and charges them a high rate. The way the ACA works is it forced insurers to pool the 1% and the 80% together and charge them all the same. Even though it is a knowable fact that some of them are way more likely to use the insurance.

  • TopherB||

    I think I'd have slightly less problem with ACA if that were true, but in reality the rate has more to do with a person's income than a set flat rate.

    Each according to their means... where have I heard that before?

  • Dweebston||

    Is that Burger King's new tagline?

  • ||

    The subsidies are scaled so that you aren't supposed to spend more than 9% of your income on health insurance. So AFTER SUBSIDIES, the price is scaled by income.

    This basically means that unless you are a very high earner, you're going to spend 9% of your income on health insurance. I think the rate is progressive also. The percentage gets lower the less you earn.

    This is why it's kind of like a huge middle class tax hike. Low earners aren't expected to pay much, high earners don't pay much because it doesn't cost that much compared to their income, so middle income pay the most, as a percentage of earnings.

  • John Galt||

    Planet Fitness?

  • Kevin47||

    "So much for that iPhone you've been saving up for since you dropped your last one in the deep-fryer at work."

    Um, any college grad who has been working at a fast food restaurant for four years would be a manager by now, with a healthy salary and benefits. Shaming people who certain types of jobs is part and parcel of how this generation has gotten where it is.

  • Homple||

    I don't think that millennial diesel mechanics, welders, plumbers, electricians or oilfield workers have to choose between student loan payments and a new smartphone.

  • Kevin47||

    If he wanted to zing millennials, he could have referenced an unpaid internship, or something genuinely frivolous. Re: fast food, obvious connotations are obvious.

  • John Galt||

    "I don't think that millennial diesel mechanics, welders, plumbers, electricians or oilfield workers have to choose between student loan payments and a new smartphone."

    Millennials get their hands dirty?

  • sasob||

    Um, any college grad who has been working at a fast food restaurant for four years would be a manager by now,...

    Um, I'm not so sure about that.

  • Faber||

    If they can do basic math and are capable of handling disgruntled customers they should be definitely be managers. If however they are smoking pot and doing their girlfriends in the fridge not so much. I worked in fast food management to get money for college, and I know they do not exactly require high amounts of skill to run them.

  • gaoxiaen||

    Thanks for the fridge idea.

  • sasob||

    "So much for that iPhone you've been saving up for since you dropped your last one in the deep-fryer at work."

    You were supposed to be working - not yakking on your phone.

  • UnCivilServant||

    Which is why he didn't make manager.

  • CptNerd||

    I believe it's time to dust off that good ol' Boomer phrase, "don't trust anyone over 30". 'Cause guess who's now way over 30? Of course the Boomer response is now "never trust anyone under 50"…

    Disclaimer: I'm a Boomer.

  • ||

    Hissssss!

  • Death Rock and Skull||

    Put it to your temple and pull the trigger.

  • newshutz||

    "Otter's words eloquently define my generation's philosophy of governance"

    I think what Blutarsky did with the mashed potatoes better defines the prevailing philosophy.

  • Eggs Benedict Cumberbund||

    My company (S corp, ESOP) of about 300 employees (mostly all degreed technical of some sort...we are an engineering services company) self insures. The best option we have is high deductible + HSA accounts. The HSA accounts can be seeded with your 401K. So an old boomer like me (56 with about 30 years relevant experience) can plunk 25k from my 401k account into the HSA to cover the 10K deductible.

    Really everybody should be on variations of this sort of insurance. Its cheaper in the long run, it works on direct payments so subsidizing the poor (which the gov is gong to do) will work within the structure of the insurance, and it puts the PRICE (not cost) decisions in the hands of the consumer. I really don't see a down side. So why do I sound like Theodoric of York when he has that epiphany?

  • phandaal||

    I'm really tired of Millennial-bashing. "My crowd" was born in a world that was already royally fucked-up by the generation of special snowflakes known as Baby Boomers, and most of us weren't raised to believe the world is going to be served up to us on a platter. We make our way the best we can just like everyone else.

    Take your "I'm better than you" article back to the buffet line at Golden Corral with the rest of the geriatrics.

  • John Galt||

    Boo hoo! Whhhhaaaaa!!

  • John Galt||

    Sorry. I'm a boomer, too. But it was still a funny article. The first part was at least.

  • John Galt||

    Hilarious.

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