I'm a pretty risk-averse person. When I went to Las Vegas, the most I was willing to gamble was a roll of quarters at the slot machines. I've always had car insurance, just in case. I buy AAA coverage too, 'cause you never know. And I've always had health insurance. My friend Joe, on the other hand, is far more comfortable with risk. He's young and healthy, and argues, "Why pay for something you're never going to use?" He feels comfortable about not having health insurance.
Indeed, there are quite a few Americans who are uninsured. For young people in particular, insurance may seem like an unnecessary expense. But for most people, the cost of health insurance is the major obstacle.
However, it's not just about how much health insurance costs. For most people, it comes down to a choice between health insurance and "X," where "X" is some other monthly expense. As a result, the cost/benefit of health insurance is inevitably compared to the cost/benefit of X, and health insurance often loses because it might feel like money being spent with no immediate or apparent benefit. After all, most people can't afford to pay for everything and have to choose what they will be spending money on every month.
It is this notion of having to choose between health insurance and something else that led me to conduct a survey in January at the Georgetown Institute for Consumer Research. I asked consumers a fairly simple question:
Many people have to make choices when it comes to their monthly expenses. If you had to choose between spending money every month on paying for health insurance versus each of the following monthly expenses, which would you pick?
I then gave a series of common monthly expense categories such as paying down debt, internet/data plans, eating out, gym memberships, etc. The goal was to determine whether health insurance would beat out any of the categories. Would consumers choose health insurance over paying for their internet? Would health insurance be preferred over Cable TV? How would it fare against paying for a gym membership?
If You Picked Health Insurance, What Are You Going to Cut?
For many Americans who purchased health insurance in the last few months, the premiums will be a significant monthly expense. Moreover, this expense will likely have to be balanced by reducing other expenses. In fact, the typical consumer's strategy will probably involve cutting out some expense category altogether.
So the big question is, what are consumers going to cut down on in the coming months? Our data suggest that spending on Internet and cell phone plans is not going to suffer. Rather, consumers may be more likely to reduce their spending on cable TV, eating out, gym memberships, and organic groceries.
If you've recently purchased health insurance, are you planning to cut down expenses in some other area? If so, what's going to be cut from your budget?