Posted by Robert on July 9, 2012
Not everything with the word “insurance” in its name is actually insurance. Sometimes, it might simply be a cost recovery plan. Here’s how you can tell the difference and why I’m opting into an insurance plan.
Insurance protects against unforeseen costs. Cost recovery reimburses planned costs. If we know that out of every 1000 workers, 5 are likely to be injured on the job, we can put in place accident insurance. It will cost 5/1000ths of a dollar for every dollar of benefit (plus admin). That is an example of insurance, and it makes economic sense. Where I worked, we had a cost recovery plan that paid for eye exams. An eye exam is something that people can get every year, not only as needed. The cost of offering the benefit (eye exams) is the cost of one exam per employee. There is no savings to individuals.
I have just begun a master degree at the University. There is a graduate student association with an insurance plan. In order to function as insurance, membership is mandatory for all full-time graduate students. It offers health and dental benefits to students and their families. Because I’m a distance student, I can choose whether or not to opt in.
The math is pretty easy. The coverage costs a little under $500 per year and it covers me, my wife and our three children. The benefit includes up to $900 of work (in one visit) each per year. For $500, I can access from $0 to $4500 of dental work. Personally, I need a crown ($1000) and my middle child needed a $350 visit. The other family members need checkups, and I don’t know how much that costs. Already, we’ll get our money’s worth, and with some luck, we’ll get reimbursed more than the cost of the coverage. That feels like a rebate on my tuition.
Do you health or dental coverage? Do you feel it’s economically worthwhile