Ads for the New York State lottery, beamed across Lake Champlain, feature groups of people singing, “If I had a million dollars, I would buy you a house.” The idea, of course, is to convince several million people to buy a lottery ticket. The odds of winning a million-dollar lottery are something on the order of one in 15 million, but the purpose of the commercial is to get you to daydream about all the things you could buy if you had a million dollars.
So, let’s daydream, but realistically. If you win a million-dollar lottery, you don’t get a million dollars, at least not all at once. You get $50,000 a year for 20 years. After taxes, you’d probably take home $35,000 a year. It’s nothing to scoff at, but it won’t buy you the mansion and the limo and the yacht. You could probably buy a nicer car and a bass boat, but if you’re the primary breadwinner for your family, you won’t be able to give up your day job.
So let’s sweeten the pot. Instead of winning a paltry 50 grand a year for 20 years, let’s say you manage to humiliate yourself enough to win a tee vee “reality show” and get $1,000,000 in one lump sum. Let’s be optimistic and say you’re still holding $600,000 when the taxman is through with you and you invest that money at the enviable rate of return of 10 percent, just to keep the arithmetic simple. That’s $60 grand a year, not for 20 years, but forever. If you’re the supporter of a family of four, you still can’t quit your job. Why not? Insurance, that’s why.
An acquaintance – who won neither the lottery nor a tee vee program – recently decided to quit his job and strike out on his own as a self-employed entrepreneur, a 21st century Horatio Alger. Preparing for his flight from wage slavery, he investigated the purchase of health insurance for his family of four. He found that to buy the same combination of medical, dental and catastrophic insurance he receives through his employer, he would have to pay $45,000 a year. (The coverage costs his employer around $13,000 a year.) If my friend had a $60,000-a-year income from our hypothetical lump-sum million, he could quit his job, buy insurance and have $15,000 a year to pay for his mortgage and feed the kids.
Insurance rates are high in Vermont. We have a system called “community rating” which means insurance companies have to sell policies to everyone; they are not allowed to cherry-pick the young and healthy and tell the old and sick to go to hell. As a result, the insurance companies that do business here – many do not – charge exorbitantly high rates.
This leaves Vermonters in a situation that is one hand immediate and distressing. Those who have jobs with benefit packages hang onto them; those without benefits, or whose jobs are imperiled are always on the verge of panic. On the other hand, our situation is philosophical. If Vermont were to abandon community rating – as some politicians and many business leaders suggest – rates will come down significantly for many people, but many other people will not be able to get coverage at any price.
For now, Vermont is keeping community rating. Although it costs us all money, I like to think we gain something in our sense of community. It’s also an expression of enlightened self-interest, because some day we will all be old or sick or both and we will need the insurance.
In the end, however, it’s a bad deal. In the end, it means the insurance companies are taking a huge bite out of our society, either by refusing policies to those who need them most in some states, or by overcharging everyone in the market, as they do in Vermont. Insurance companies claim 25 cents of every health care dollar spent in America and even at that, 20 million Americans – almost one in ten – has no health insurance at all.
Between the war and the economy and the price of gas, politicians won’t get around to talking much about insurance this year. It’s too bad, because your insurance situation informs your answer to the famous question: “Are you better off today than you were four years ago?” The high cost of insurance is making indentured servants of us all; destroying what not so long ago was a very real American dream.
If I Had a Million Dollars
Ads for the New York State lottery, beamed across Lake Champlain, feature groups of people singing, “If I had a million dollars, I would buy you a house.” The idea, of course, is to convince several million people to buy a lottery ticket. The odds of winning a million-dollar lottery are something on the order of one in 15 million, but the purpose of the commercial is to get you to daydream about all the things you could buy if you had a million dollars.
So, let’s daydream, but realistically. If you win a million-dollar lottery, you don’t get a million dollars, at least not all at once. You get $50,000 a year for 20 years. After taxes, you’d probably take home $35,000 a year. It’s nothing to scoff at, but it won’t buy you the mansion and the limo and the yacht. You could probably buy a nicer car and a bass boat, but if you’re the primary breadwinner for your family, you won’t be able to give up your day job.
So let’s sweeten the pot. Instead of winning a paltry 50 grand a year for 20 years, let’s say you manage to humiliate yourself enough to win a tee vee “reality show” and get $1,000,000 in one lump sum. Let’s be optimistic and say you’re still holding $600,000 when the taxman is through with you and you invest that money at the enviable rate of return of 10 percent, just to keep the arithmetic simple. That’s $60 grand a year, not for 20 years, but forever. If you’re the supporter of a family of four, you still can’t quit your job. Why not? Insurance, that’s why.
An acquaintance – who won neither the lottery nor a tee vee program – recently decided to quit his job and strike out on his own as a self-employed entrepreneur, a 21st century Horatio Alger. Preparing for his flight from wage slavery, he investigated the purchase of health insurance for his family of four. He found that to buy the same combination of medical, dental and catastrophic insurance he receives through his employer, he would have to pay $45,000 a year. (The coverage costs his employer around $13,000 a year.) If my friend had a $60,000-a-year income from our hypothetical lump-sum million, he could quit his job, buy insurance and have $15,000 a year to pay for his mortgage and feed the kids.
Insurance rates are high in Vermont. We have a system called “community rating” which means insurance companies have to sell policies to everyone; they are not allowed to cherry-pick the young and healthy and tell the old and sick to go to hell. As a result, the insurance companies that do business here – many do not – charge exorbitantly high rates.
This leaves Vermonters in a situation that is one hand immediate and distressing. Those who have jobs with benefit packages hang onto them; those without benefits, or whose jobs are imperiled are always on the verge of panic. On the other hand, our situation is philosophical. If Vermont were to abandon community rating – as some politicians and many business leaders suggest – rates will come down significantly for many people, but many other people will not be able to get coverage at any price.
For now, Vermont is keeping community rating. Although it costs us all money, I like to think we gain something in our sense of community. It’s also an expression of enlightened self-interest, because some day we will all be old or sick or both and we will need the insurance.
In the end, however, it’s a bad deal. In the end, it means the insurance companies are taking a huge bite out of our society, either by refusing policies to those who need them most in some states, or by overcharging everyone in the market, as they do in Vermont. Insurance companies claim 25 cents of every health care dollar spent in America and even at that, 20 million Americans – almost one in ten – has no health insurance at all.
Between the war and the economy and the price of gas, politicians won’t get around to talking much about insurance this year. It’s too bad, because your insurance situation informs your answer to the famous question: “Are you better off today than you were four years ago?” The high cost of insurance is making indentured servants of us all; destroying what not so long ago was a very real American dream.
(c) Mark Floegel, 2004