Low Cost Health Insurance

Health care concerns have been escalating at a rapid pace, and the COVID-19 pandemic has further exacerbated fears among virtually every demographic. According to the Kaiser Family Foundation, health care costs head the list of household expenses people worry about. The foundation discovered that, in 2019, at least half of adults in the United States did not seek medical attention because it was too expensive. This is not surprising, as medical expenses were responsible for almost two out of three bankruptcies that year. So, Why is Health Insurance so Expensive? Many people have thoughts about this, let us understand in detail.

A 2020 Commonwealth Fund survey reports that health insurance costs are increasing at a faster rate than income. Consequently, more than 43% of working-age adults did not have enough health insurance when the COVID-19 pandemic struck. About 30 million did not have any insurance, and 40 million experienced a coverage gap over the past 12 months or were effectively underinsured because of high deductibles or other out-of-pocket costs.

The United States is spending far more on health care per person than other developed countries. Although the Affordable Care Act dramatically changed the landscape of individual health care to make it more accessible, many Americans still cannot afford and do not have health insurance. Why is it so expensive here?

An Irrational Marketplace Making Health Insurance so Expensive?

Johns Hopkins surgeon and professor Dr. Marty Makary points to “an irrational marketplace” that condones price gouging as the chief reason that healthcare costs are so high. He believes that the inflated health care spending in the United States is a result of higher salaries for medical professionals, increasing prescription drug prices, rising hospital administration costs and higher prices for many health care services. An underlying incentive to generate revenue drives up these costs for the public.

Warranty System

In 2017, Aetna’s CEO Mark Bertolini likened current U.S. health care to a “warranty system” that waits until something is wrong. He argues that the system is more interested in health insurance than individual behavior or social factors that affect health. Instead of focusing on quality of life, “what we have is a break-fix operation called the health care delivery system that fixes broken people, and by then it’s too late.” The CEO sees this approach as a major driver of health care costs.

Bertolini believes that rising opioid misuse is a prime example of this “break-fix” approach to health care and another factor behind high health care costs. He feels that the crisis stems from and engenders a loss of hope among Americans, and the nation is not investing enough in social programs to deter prescription and illicit drug abuse. Thus, with Americans consuming 80% of opioids produced in the world, an inordinately high-cost structure has emerged.

Is Paying Per Service Making Health Insurance so Expensive?

The U.S. health care system typically charges patients based on the services they receive. It’s more profitable for the physician, hospital and health care system to promote more volume for specialty procedures and medications when simple physical exams and histories may be sufficient. A 2018 Washington Health Alliance study found that a third of 47 popular medical tests and services were overused and wasteful, collectively costing $282 million.

Is Physician Fees Making Health Insurance so Expensive?

Doctors in the U.S. earn more money than physicians in many other countries. American doctors also spend more on running their practices and malpractice insurance. Doctor fees comprise about 20% of total health care costs.

Defensive Medicine

Defensive medicine refers to “just in case” testing and treating patients to protect health care providers from being sued for malpractice. The tests and treatments may or may not be cost-effective or medically justified. How much defensive medicine costs is difficult to determine because it is based on each doctor’s judgment.

Overuse of Specialists

People are increasingly turning to specialists for care because the number of primary care physicians is decreasing, and many individuals prefer to consult a specialist. Specialty services are generally more costly than primary care. Specialists tend to charge more and perform or order more tests. Individuals with multiple disorders may desire or require several specialists for treatment.

Interplay of Providers and Insurers

Companies such as drug manufacturers and hospital systems have an abundance of leverage at their disposal when negotiating with private insurers and a host of other potential payors. One study discovered that private insurers paid up to 350% of what Medicare would have paid for the same medical service at the same health care facility in 2018. Insurance companies themselves appear to be largely responsible for this conundrum as well. A 2018 NPR article reported that, in many cases, insurers agree to pay inflated prices and pass the costs on to patients, at great profit. Providers and insurers often formulate secret deals, too, yielding surprisingly expensive ramifications for covered individuals.

Administrative Costs

Administrative costs make up anywhere from 20% to over 30% of health care costs, and most of these come from private insurance companies. Insurers channel much of their resources toward marketing and utilization review. This process screens applicants for pre-existing conditions or the potential for developing an illness, with the goal of not paying for services whenever possible. Meanwhile, Medicare’s administrative costs hover much lower; they’re estimated to be between 1.1% and 7%. Experts maintain that Medicare is cheaper because the program does not spend so much time and resources trying to deny care.

Health Care Maze

The complicated, fragmented structure of American health care prolongs administrative processes and increases overhead costs. Health care providers must navigate through time-consuming regulations regarding usage, coding and billing from many different private insurance plans. The system institutes widely varying rules, with funding and out-of-pocket costs fluctuating wildly as well.

Is Drug Costs Making Health Insurance so Expensive?

Americans outspend Europeans at least two-fold on drug costs. In Europe, the governments regulate pharmaceutical prices; in the U.S., private insurance companies and drug manufacturers negotiate prices. Medicare, however, is not allowed to negotiate prices.

Further, consumer demand for certain drugs has skyrocketed along with marketing efforts to the public. Many people are self-diagnosing and convincing their doctors to prescribe these expensive treatments. This is leading to inappropriate or excessive use and driving up costs.

Lack of Set Prices

Because so many providers and payors comprise the U.S. health care system with no method to control costs across the board, providers charge according to their markets. The same medical service can differ greatly depending on the geographical area, the private or government insurance program and the reputation of the doctor or hospital.

How TrueCoverage Can Help

TrueCoverage was founded to help everyone in every state find affordable, comprehensive health insurance coverage. We are your all-in-one insurance shop, serving as a personal advisor, personal broker and marketplace. Along with free, 24/7 customer support by licensed agents, TrueCoverage gives you the tools and resources to get the best plans at the best price and understand the ever-evolving American health care system. To get the coverage you need and can afford, contact us today for a free health insurance quote.