Mom and Dad loved to travel. Though it was expensive, they managed their money well enough that they could be prepared for unexpected health services, as well as seeing the world.
This was a few years back, but they had already survived the great depression, a wartime economy, and even an earthquake that destroyed most of their city. Neither of them came from a wealthy family; in fact both of their parents were on the low side of the economic scale.
By honest hard work and frugal habits, they built a life for their family and managed their modest finances well. Dad was a small businessman who formed a partnership with his good friend after WWII ended and started a print shop.
Most of their customers were also small businesses who needed invoices, inventory lists, letterheads and envelopes. This was before the time of computer-generated business forms, and the growing economy needed printers to provide for various business needs.
Did They Need Insurance?
The printing business grew, and though they were not getting rich, they were making a comfortable living for their families and gaining more customers by referrals from those who were pleased with their prices and quality.
This was in the late 1940s and early 50s when the health insurance started to become popular. Several life insurance companies were entering the health insurance field and offering group plans.
Before the 1920s, medical science provided little help for most patients. Advanced pharmaceuticals, sophisticated testing diagnostic and treatment procedures which are common today, did not exist.
Patients were usually treated at home by a general practitioner. Even surgery was sometimes performed in private homes in those times. People had relatively low medical costs.
Chickens, eggs and homegrown vegetables were sometimes bartered for medical services. People depended on family, friends churches and fraternal groups to help them through really tough times that might be caused by illness and medical expenses.
Some employed workers began buying "sickness" insurance, similar to today's "disability" insurance, because loss of income from being sick was much more of a financial concern than merely paying a doctor's bill.
In the following three decades, several changes made medical care more available, effective and expensive. People with serious illness were more likely to be treated in hospitals, and to require some extra costs for tests.
These changes and others caused the price of treatment to rise as demand for (and costs of) medical care went up.
His Own Business
By about 1959, Dad and his partner started thinking about about health insurance for themselves and their families. Some large businesses were offering the incentive of health coverage with group plans.
By this time, about 70 percent of Americans had some kind of health coverage to help pay for extra medical treatments and hospital stays which were increasingly more common and expensive .
Unfortunately, healthcare premiums were expensive. As a business run by two individuals, my dad and his partner did not qualify for a group rate. Individual health insurance would be a financial impossibility, costing about 60 dollars a month-- a whopping $720 a year for each partner.
Perhaps that does not sound like a lot, but in times when yearly income for an average middle-class family was around $2500, it was a considerable percentage of their take home pay.
Being in their mid-forties, Mom and Dad knew they should start thinking about future health needs, even though they were both in good health at the time.
They decided that their best choice was to pay a set amount into an interest-bearing savings account of their own, rather than giving money to the insurance company year after year.
(This was also several years before the U.S. Government enacted the Medicare program for senior health care, in 1965.)
At $50 per month, they were still paying quite a bit in, but at least they were paying it to themselves and not giving it away to an insurance company.
The rules they set for themselves were:
1.) They could use the money only for medical services, and they would continue paying a monthly amount.
2.) After their own contributions and accumulating interest, reached a level that they thought would cover unexpected medical needs, they would keep making regular payments, but they would they would use some of the "extra" money for travel.
A Healthy Side-Effect
After four years of saving, they took their first European group tour which cost $829 per person. They flew in the new Boeing 707 jet , and for four weeks they visited France, Germany, Switzerland, Austria, Italy, Monaco and England.
In the next 20 years they made 14 major trips and a few smaller ones, using their "health and travel" account. They saw the South Pacific and Caribbean, China, Japan, Russia, Poland, Peru, Brazil, Argentina, Egypt, Greece, Yugoslavia, Spain, India , Iran, Thailand, and several other countries.
They made multiple visits to many of the worlds major capitals and cities. They cruised the Nile, the Rhine and the Amazon, marveled at the Alps and the Himalayas, and saw the famous arts and antiquities of the world's great cultures,as well as many natural wonders..
Would it be possible to do this today? Could people put away a "premium amount" in their own personal account that would cover medical expenses?
They were initially saving about $600 per year, (around 20% of their total income) but after reaching a certain level, they were putting their "insurance fund" in high yield CD's that were earning as much as 12% at certain times. They continued to pay their personal premiums to themselves, raising them a little each year, and luckily, had excellent health.
Times have changed and everything is more expensive these days-- especially medical services, treatments and hospital care.
In 2007, the median annual US household income was about $50,233. if a person put away 20% that would amount to a little over $10,000 in a year.
Annual Premiums for family coverage in 2007 was a little over $12,000 from one major provider. Workers with group coverage through their employer paid about $3,300 per year.
That is a big difference, but one thing to consider is that those premiums going to an insurance company, could be going into your savings or investment account. (It's called "saving".)
Would it work for you in today's economy? Maybe not. If you have children at home, and access to group coverage, it might not be the best choice. You have to crunch the numbers with consideration of your own circumstances.
However, if you are self- employed or paying a very high premium and if you are motivated with the necessary self-discipline, it still might be an option to consider. It depends upon your personal health and family situation.