In 2015 I had hernia surgery in California.
I had great insurance. I was the one picking the plan for my company, and I bought us the best one available. When the paperwork settled, the total bill for that surgery was close to $80,000. I paid about $1,200 out of pocket and walked away believing the system had worked.
A few years later my friend Max Shank needed the same surgery.
Max pays cash for medical care. He called around, told them he was a cash buyer, and negotiated before he ever got near a table. He paid $8,000.
Same procedure. Ten times the price.
The price is fiction, and your insurer likes it that way
That $80,000 number has a name. Hospitals call it the chargemaster price, and it’s a fictional figure nobody actually pays. It exists to anchor the negotiation with the insurance company, which talks it down to $45,000 and books a win. The cash price, the one a human being with a checkbook can get, was eight grand the whole time.
Here’s the part that took me longer to see: your insurance company wants that number high.
An insurer only grows by raising premiums. And the only way regulators let them raise premiums is by pointing at last year’s claims. Higher prices justify higher premiums. The thing you’d assume they fight is the thing their growth depends on. Hospitals want prices up. Pharma wants prices up. And the company you pay to protect you from those prices wants them up most of all.
Everybody says the health care system is broken. Michael Cazayoux put it better on the show this week: viewed as a financial market, it’s one of the most thriving systems on the planet. It’s just not thriving for patients or employers.
Six years without health insurance
Six years ago I stopped buying health insurance.
I didn’t go bare. I joined a health share: a pool of people who agree to live reasonably healthy lives, pay cash for care, and share each other’s big medical bills. It is not insurance. There is no legally binding promise to pay, which sounds terrifying until you look at how the promise actually performs.
Last year the average claim denial rate across the insurance industry was 18 percent. The largest insurer in the country denied roughly a third of its claims. A guarantee that fails one time in three is not a guarantee. Meanwhile the best health shares publish their numbers in the open. One of the strongest companies in the space posts every sharing request it receives, approved or denied and why, and runs a denial rate under 1 percent.
The cost difference comes from two mechanics. Members pay cash, which gets the real price instead of the chargemaster fiction. And there’s a waiting period, usually a year or two, before pre-existing conditions are shared, which keeps the pool from becoming a place people jump into the week they need surgery.
Michael’s family of five pays $343 a month. The same family on a bronze marketplace plan would run $1,800 to $2,000, with a brutal out-of-pocket max and a tiny network. Back when his family was paying $1,200 a month for marketplace coverage they barely touched, his wife kept asking what they were even paying for. Most people have asked that question at some point. Almost nobody goes and answers it.
My own version of the answer, six years in: every time I tell a clinic I’m paying cash, the price drops. I’ve had prescriptions cost less in cash than the copay would have been on insurance. I’ve confirmed my plan will share care outside the country if I can make the case it’s better or cheaper. And on the show we got into plans that cover the first $7,000 of a midwife and everything associated with a home birth. Find me the insurance company doing that.
Who this is not for
Now the honest part. This is not for everyone. Most Americans have ongoing, complex medical needs, and if that’s you, insurance probably is your play. The waiting period on pre-existing conditions is real, and it’s the number one reason sharing requests get denied. And of the 120-plus health share companies out there, most aren’t worth your time. Michael’s filter: reimbursement under 30 days, and hundreds of reviews averaging 4.5 stars or better. That filter alone clears most of the field.
The founder math
The reason I care about this beyond my own bank account: the workforce is going 1099. More founders, more contractors, more solo operators every year, and every one of them eventually hits the health insurance question. I’ve coached too many people who stayed in a job they’d outgrown because a benefits card felt like safety. Don’t let health insurance keep you in a job you hate. The math that’s supposed to trap you is an hour of homework.
And something changes when you become the buyer. You start caring what things cost. You shop. You ask. I went looking for the correlation between the price of a medical service and the quality of the outcome, and there isn’t one. The thing that actually correlates with quality is volume: the clinic that does your exact procedure all day, every day. Those places usually have the clearest cash prices in the business.
The system runs on you not looking.
Ted and I went deep on all of it with Michael this week: how health shares actually work, who they’re wrong for, what employers can do instead of eating a group-plan increase every year, and the Ozempic markup that explains the entire game in one number. Watch the full episode here.