Imagine paying upwards of $1,000 per month for health insurance only to be hit with a catastrophic bill following a serious illness or accident. Not only is it possible, but it is also actually pretty common. Despite government claims of insurance gains in the more than 10 years since the Affordable Care Act (ACA) was implemented, catastrophic healthcare bills continue to be the norm in this country.

For the record, the World Health Organization (WHO) defines a catastrophic healthcare bill as one that exceeds more than 40% of a patient’s income after food and housing. So think about what you pay for food and your mortgage, homeowners’ insurance, and taxes. If more than 40% of whatever is left over goes toward paying healthcare expenses, you are facing a catastrophic situation. The question is, why?

We get the fact that the uninsured face healthcare bills they cannot possibly pay without some sort of assistance. But that is not the way it’s supposed to be for people with group health insurance. Consumers who get health insurance through their employers pay hefty premiums every single month. They also pay copays and are subject to deductibles. But what are they actually paying for?

Health Insurance Isn’t Insurance

As a freelance writer who has spent more than a decade researching and writing about healthcare topics, I have come to realize there is an elephant in the room whenever people discuss them. The elephant is huge, mind you, but so many people just cannot see it. Here it is – health insurance isn’t really insurance.

Think about your car insurance. You pay your annual or semi-annual premiums in hopes that you never have to make a claim. Any claim you might make would be the result of an accident. No accidents mean no claims. No claims mean the chances of your premiums rising beyond your ability to pay are slim to none.

Now, what if you used your car insurance the same way you use your health insurance? What if your car insurance paid for every tank of gas, every set of tires, every pair of wiper blades, etc.? How high do you think your annual premiums would go? They would go through the roof, that’s how high.

Now do you understand the problem with health insurance? It is not really insurance. Private health insurance is just a clearing house payment system. We give money to health insurance companies to pay bills on our behalf.

There Is Another Way

Health insurance doesn’t work for a lot of reasons. But there is an alternative in self-funded health plans. Self-funded health plans are offered by employers similar to how health insurance is offered. But here’s the dirty little secret: self-funded plans aren’t insurance plans.

A self-funded health plan can be administered by an insurance company or a third-party, like StarMed Benefits (more info here) out of Las Vegas, NV. But as StarMed explains, self-funded plans are funded entirely by employers and their workers. Employers bear most of the costs while employees make their contributions through payroll deductions. All claims made against the plan are paid by the plan.

The beauty of this model is that employers and their employees can work together to craft customized health benefits that meet individual needs while still containing costs. It is a system that works as good – if not better – than traditional group health insurance.

All the supposed insurance gains we have made over the years have done very little to put a stop to catastrophic healthcare bills. No wonder so many people feel like they are throwing money away by purchasing their employer-sponsored health insurance.

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