Why is Health Insurance So Expensive?

One of the largest complaints about health insurance is the cost of it. There are three things guaranteed in life; death, taxes, and increasing health insurance costs. No matter what legislation the government passes and no matter how the insurance policies are structured, it seems like the monthly premiums for health insurance keep on going up. So, why is health insurance so expensive?

Healthcare is Expensive

We should make one thing very clear: healthcare and health insurance are two different things. In the United States, everyone has access to healthcare. Anyone can walk into an emergency room and get healthcare without having health insurance. Anyone can schedule visits with doctors and get the healthcare they need or want, without having health insurance. The problem is the high costs of receiving healthcare. Because of this, some people can’t afford it or simply just don’t want to pay it. Health Insurance is what pays for some or all of a persons healthcare. As with any insurance, health insurance is a form of financial protection against the unknown.

A long time ago we used to get our healthcare from small, local, doctor-owned medical clinics; where the doctor is in control of the costs. This has slowly changed over the years to large hospital organizations and large medical groups. These large organizations do a great job, but they also create more overhead costs and less competition in an area. Hospitals and medical clinics are generally non-profit, but that doesn’t mean they aren’t in it for the money. Non-profit just means they spend the money in different ways. These large medical organizations re-invest their excess money into the organization to become even larger. This helps them grow even larger and makes it harder for competitors to give local consumers options for their healthcare needs.

Our Expectations

We demand our healthcare be top notch. Doctors and nurses have to have the right training, knowledge, and ability to do their job. All equipment has to be sterile and reliable. Medical staff are, in a sense, playing God. They patch us up, fix our bodies, and help us get back to a healthy state. Our expectation of healthcare is very high, as it should be. But having such a high expectation means that the services and care we receive have to be perfect. There is very little, if any at all, margin for error. When something goes wrong, it often ends in a lawsuit costing the medical facility a lot of money.

A lot of people expect health insurance to cover all of their healthcare. Some people think the two terms, health care and health insurance, are interchangeable. They are not, they are two different things. Some people think that their health insurance policy should cover all medical services, but that’s not what insurance is supposed to be for. An insurance policy is supposed to be financial protection against the unexpected, not a maintenance policy for expected events.

So…Why is Health Insurance so Expensive?

Health insurance is so expensive because of what we expect from it. We don’t want to pay out of pocket for our routine visits, or when we choose to have a baby, or when we need medical help because we haven’t lived a healthy lifestyle, etc. The list can go on and on of what we don’t want to pay out of our own pocket. The more healthcare costs that we want our health insurance to cover, the more our health insurance is going to cost; it’s simple math.

Healthcare Costs + Healthcare Expectations + Insurance Expectations = Expensive Health Insurance

Wasn’t Obamacare Supposed to Make Insurance Affordable?

When the Affordable Care Act (Obamacare) became law in 2010, it created some standardization to some health insurance plans. The “ACA” created a list of 10 healthcare benefits that all ACA plans must cover. These “Essential Health Benefits” (EHB) must be included in a health insurance policy that is considered a “Qualifying Health Plan” (QHP) under the definitions of the Affordable Care Act law. These essential health benefits are: prescription drugs, pediatric services, preventative and wellness services, emergency services, hospitalization, mental and behavioral health, maternity care, ambulatory services, laboratory services, and rehabilitative services. In addition to these services, the ACA law forces qualifying health plans to cover pre-existing conditions, regardless of what it is, how long you have had it, or how it happened.

Because qualifying health plans have to provide all those services, including pre-existing conditions, on ever plan; the insurance companies have to adjust the pricing to be able to pay out the claims for everyone. Whether you are healthy or not, whether you need maternity coverage or not, whether you need pediatric services or not; the ACA qualified plans have to provide those coverage’s and have them built into the pricing of the policies. When the ACA was passed, it forced insurance companies to have “adverse risk”, something that insurance companies try to avoid. Adverse risk is when there is a high or unknown amount of financial exposure. This is why you have seen such a rapid increase in health insurance costs since 2010, compared to the relatively slower rate of increase prior.

Can I Get Cheaper Health Insurance?

It might be possible to get cheaper health insurance, but it depends. The options available to you will depend on the State you live in. Some States are more consumer friendly and allow more competition between insurance companies. This gives you more options to choose from. Some states allow consumers to purchase health insurance plans that don’t have all 10 essential health benefits like the Affordable Care Act requires. But some States have limited what is available for their residents to only the plans that meet the high and expensive standards of the Affordable Care Act, whether or not the services are even applicable to you.

Affordable Health Insurance Quote

The best way to find more affordable health insurance options for you is to get a health insurance quote. Each state has different rules and availability of plans from different insurance companies. Because of this, it’s important to talk with someone who is familiar with everything available. A health insurance broker will often work with many companies and offer different types of plans. It’s recommended you talk with someone who has different options to offer, so you get the best affordable health insurance.