It has taken over 40 years for index investing to reach 20% market share. That’s longer and less heft than most people would guess. But it’s also a reminder of how a good idea can take generations of incremental awareness and results to move beyond shallow roots. Index investing is a form of passive investing, a low fee set it and forget it strategy. The reasoning behind it is that most individuals and funds, after fees, can’t beat the S&P 500. Why try? Just match it by relying on the collective wisdom of the active investors to set prices. Even Warren Buffett, active investor and index-beater-in-chief, recommends it for many people. I won’t get into the nuances and pros and cons of active and passive investing but I prefer active. I like choosing stocks, following companies, doing research, and owning pieces of 10-15 companies (that’s enough diversification), instead of tiny pieces of hundreds or thousands of companies. Wherever you fall with your interests and ideology, the important thing is that you invest.
With healthcare, we shouldn’t be passive consumers. There should be no set it and forget it. But often with our health insurance choices, we tend to be passive, particularly with plan choices, where we go for care, health savings accounts (HSAs) and how we use those. For example, only about 4% of HSA holders invest, though it’s growing; the triple-tax savings and compounding values of those accounts for future expenses.
Being passive in healthcare is easy. Most people under 65 get their benefits through their employment, and there are typically 1-3 plan choices, so employees don’t have much choice beyond what the company and consultants decide is on the menu. Costs grow and employees are largely in the dark. ICD9, CPT, Billed vs. Allowed. EOBs. What? Most people don’t think regularly about their medical needs so that adds to it. Google search trends show how our healthcare attention is tied to certain times of the year. Retirees in individual Medicare Advantage or Supplement plans are led by inertia, with over 90% staying in the same plan year-after-year, even when switching plans as health needs and plan structures change can mean thousands of dollars in savings.
You can be vigilant by controlling what you can control, exercising more and shopping less in the center of the grocery store, reading a little, asking questions, putting thought into plan selection, and studying the anti-Pulitzer winning open enrollment guides. Some companies are promoting healthcare and financial literacy. Quizzify is one.
These may be incremental changes, not the stories of page A1 flying startups. The perfect health plan doesn’t exist but the higher deductible will likely be the best for over 90% of people, especially over 5-10+ years since healthcare expenses aren’t steady or linear. I suspect, that like with SUVs shown by some studies to be less safe than cars, that over time, high deductible plans may be “safer” due to an increased feedback loop on behavior and direct costs and the virtues of increased skin in the game over time.
To be right in the long-term, we should be active in choices that impact our health and wealth, at least in where the big dollars and decisions are. The right nudges and shoves may not come from an employer. This demands our active attention.