This is a must read parable from Warren Meyer. My wife and I just had a similar experience in the health insurance market. We have run through our annual deductible on our “high” deductible health plan (the one we like, and the one being phased out under the new progressive reforms), so our insurance is kicking in for some recent medical visits. Our son went in for an x-ray evaluation (not even the x-ray) and the invoice billed our insurance company almost $500. We paid about $80. Had we paid out of pocket, that invoice price would have been substantially lower. Of course we did not shop around for a better price than $500 – after all, it wasn’t our money we were spending, or was it?
Anyhow, here is a highlight from Coyote:
For a total of $710.40. Same service. Same car. Same customer. Same part. Probably the same repair guy. 2.2x higher price.
I think the conclusion is pretty strong. Anything we shift to insurance from having individuals pay out of pocket gets substantially more expensive. And this doesn’t even address my changing willingness to live with a small windshield crack and avoid this purchase altogether when I am paying the bills vs. when I am not.