Why Is Health Insurance So Expensive

Your Insurer Spends A Lot On Marketing

The real reason American health care is so expensive

Your insurance providers marketing costs may impact what you pay for health insurance even more than the administrative ones discussed above.

After all, it isnt unusual for large insurers to spend many millions of dollars on advertising and other marketing efforts.

Well, the monthly premiums you pay for your health plan help them cover those expenses. Which is another way of saying: if your health insurance is expensive, you might be able to blame, at least partially, your providers marketing department.

Us Health Care Is Highly Fragmented

Benjamin blamed the complex and fragmented structure of U.S. health care from billing to care delivery which can unnecessarily prolong administrative processes and increase overhead. A recent study found that in 2017, administrative costs made up 34.2% of health care costs in the U.S., twice the percentage in Canada, which has a decentralized, publicly funded system.

Another example: Medicare, the country’s national health insurance program for Americans 65 and older, has much lower administrative costs, between 1.1 and 7%.

“Medicare … is drastically cheaper, because we don’t spend a lot of time trying to deny people the care they need,” Balber said. “There’s not as much dedicated to the bureaucracy of health care as there is in private systems.”

Drug Costs Are Rising

On average, Americans shell out almost twice as much for pharmaceutical drugs as citizens of other industrialized countries pay. High drug prices are the single biggest area of overspending in the U.S. compared to Europe, where drug prices are government regulated, often based on the clinical benefit of the medication.

With little regulation of drug prices, the U.S. spends an average of $1,443 per person, compared to $749, on average, spent by the other prosperous countries studied. Drug prices in the U.S. are 256% of those in comparison countries. In the U.S. private insurers can negotiate drug prices with manufacturers, often through the services of pharmacy benefit managers. However, Medicare, which pays for a hefty percentage of the national drug costs, is not permitted to negotiate prices with manufacturers.

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Supplemental Insurance Costs Money Too

Many seniors who sign up for Medicare wind up buying supplemental insurance, otherwise known as Medigap, to pay for some of their healthcare costs not covered by Medicare. The cost of Medigap varies depending on the scope of coverage at hand, but the higher the premiums, the better the benefits, and vice versa. Furthermore, while Medigap will help pay for things like copayments and deductibles, it won’t pick up the tab for routine dental, vision, and hearing services.

The Average Cost Of Health Insurance By Plan Types

There are four types of health plans you can choose on the Marketplace, with varying degrees of flexibility and cost:

Health Maintenance Organization : HMOs tend to have lower premiums but require you to use a specific set of providers and get referrals to specialists for covered services, except in emergencies. Silver HMOs average $473 per month.
Exclusive Provider Organization : Somewhere between an HMO and a PPO, EPOs typically require that you use the health plans in-network providers, but you dont always need referrals to see specialists. EPO Silver plans average $508 per month.
Preferred Provider Organization : PPOs tend to be more expensive than HMOs but typically offer a broader range of providers. You usually dont need to get a referral to see specialists for covered services. On the Marketplace, Silver PPO plans have an average premium of $517.
Point of Service : POS plans tend to be the most flexible at an increased financial cost. You can usually get care outside of the health plans provider network, though youll likely pay more for those services. POS Silver plans have an average monthly premium of $534.

Average Health Insurance Premiums by Plan Type – Silver Plans

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$534

Affordable Care Act Major Medical Insurance Plans

These qualified health plans provide comprehensive major medical insurance coverage which complies with the minimum essential coverage guidelines of the ACA.

The annual open enrollment period for ACA coverage typically ends in December. However, you may be able to qualify for a special enrollment period if you have experienced a qualifying life event such as a move, job change, marriage or divorce, a family death, or birth or adoption.

How Do Medicaid And Medicare Contribute To High Costs

Government policies contribute to high health costs in other ways too. In the case of Medicare and Medicaid, the government reimburses doctors and hospitals at rates far below what private insurers pay. Thats a good deal for the government, but the result is that hospitals and providers end up charging private insurers and patients more to make up the difference. John Cochrane summarizes this arrangement:

The government wants to subsidize health care for poor people, chronically sick people, and people who have money but choose to spend less of it on health care than officials find sufficient. These are worthy goals, easily achieved in a completely free-market system by raising taxes and then subsidizing health care or insurance, at market prices, for people the government wishes to help. But lawmakers do not want to be seen taxing and spending, so they hide transfers in cross-subsidies. They require emergency rooms to treat everyone who comes along, and then hospitals must overcharge everybody else. Medicare and Medicaid do not pay the full amount their services cost. Hospitals then overcharge private insurance and the few remaining cash customers.

In the video below, Cochrane explains what is needed to keep this complex system of cross-subsidies in place namely, the government must limit competition so providers and hospitals can overcharge private insurers and patients without worrying about new entrants.

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The Average Cost Of Health Insurance By Age

Most people need more health care as they age, and health insurance rates go up for older people to cover those expected costs.

In MoneyGeeks analysis which does not account for tax credits or other subsidies the average premium for an 18-year-old was $324 per month compared to $642 for a 50-year-old and $970 for a 60-year-old. However, older people may be eligible for higher subsidies if they have low incomes, such as if theyve retired or scaled back their working hours.

Average Health Insurance Premiums by Age

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$970

Is Paying Per Service Making Health Insurance So Expensive

Doctors Explain Why U.S. Healthcare Is So Expensive (HBO)

The U.S. health care system typically charges patients based on the services they receive. Its 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.

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Claims And The Rising Costs Of Healthcare + Treatment

The most obvious answer to why health insurance is so expensive is because healthcare is so expensive.

Of course, new and advanced treatments and technologies can be expensive, but even the cost of basic preventive care â screenings, testing and your regular checkup â has increased. For instance, the cost of a pneumococcal vaccine has risen by more than 50% between 2010 and 2017.

And all that preventative care, as well as the essential health benefits mandated by ACA-compliant plans, is now shared by all healthcare consumers.

Why Is Healthcare So Expensive In The Us

One topic thats quite hard to understand is the United States Healthcare system. In particularas the system has been more scrutinized in recent yearsmany people have been asking why is healthcare so expensive these days? This is especially true for company health insurance plans, which can eat up a lot of a companys budget.

Its very important to understand the factors that lead to health insurance being so costly. Having a better understanding of the system can help you find ways to lessen your own health insurance costs for yourself and your employees.

Today, were going to dive into the variables that are increasing health insurance costs and offer up some solutions to decrease costs for your company. Hopefully, by the end of reading this blog, your understanding of health insurance costs will be crystal clear.

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Why Health Insurance Is So Expensive

In 2020, the average American paid $456 per month for health insurance, and this increases to $1512 per month for a family. While this figure varies according to your healthcare needs and geographic location, one similarity for all Americans is that the cost of their healthcare insurance is rising yearly.

For instance, people getting health insurance from their employer saw their annual premiums for a family rise by 37% from 2015 to 2020. Even annual premiums provided by the Affordable Care Act rose 97% during this same time period.

However, higher premiums are only one aspect of the total cost. Healthcare insurance companies have been increasingly switching to high-deductible health plans that can see some people paying up to $14,000 for medical services until their insurance company steps in.

Experts have been studying the rising cost of healthcare in America for years, and while the issue is complex, there are some key reasons that people can point to, which are listed below.

Why Is Auto Insurance For A Teen In Florida So Expensive

Lets unpack the reason why Florida car insurance is so expensive.

First off, Florida requires its drivers to carry Personal Injury Protection insurance. PIP is an extension of coverage existing in no-fault states. PIP coverage helps pay for your and your passengers medical bills after an auto accident, regardless of who is at fault.

Auto insurance rates are also higher because drivers in Florida are only required to carry very low minimums on their insurance. In turn, accidents resulting in higher loss ratios drive up the market prices, leading to increased rates. Its against the law to drive without insurance in Florida. The required minimums for insurance in Florida are listed below.

Zip Code

The required minimums for Property Damage Liability and Personal Injury Protection are $10,000 each, respectively.

If you wish to acquire the minimum bodily injury requirements, youre looking at $10,000 per person/$20,000 per accident.

If the required minimum coverages were higher, the individual cost of insurance would, perhaps, be lower in Florida.

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Your Insurance Company Has A Lot Of Administrative Costs To Cover

What are administrative costs and why can they make health insurance expensive? One example of an administrative cost is employee salaries. Another example is office space.

Theyre just the tip of the iceberg, though. Insurance companies must spend money to stay in business and provide health coverage.

As for why administrative costs might be to blame for your high health insurance costs, insurance companies usually pass on some of those costs to their customers. Higher administrative costs can lead to higher premiums and other payments.

Lack Of Price Transparency

Another problem that comes with an open healthcare market is the lack of price transparency.

The U.S. sometimes seems like the Wild West for medical providers. Since the government leaves the price-setting to them, youll find them quoting all sorts of charges for their medical services. The prices vary quite extensively from one provider to another.

In some cases, the prices are dictated by not just the market demand, but also the type of payer, as well as geographical location. If you choose to pay with your private insurance, for example, you can expect very different rates from what government programs are charged for the same range of services.

Take COVID-19 tests, for instance. While some labs charge as little as $23 for a single test, some health insurers have paid as much as $2,315.

With such a complicated pricing system, it becomes difficult for individuals to estimate even the costs of basic medical procedures. To make matters worse, hospitals and medical providers dont usually publish their service price lists. You dont find out the full costs until after treatment. This makes comparison shopping difficult or impossible.

Even if it was possible to do so, comparison shopping is just not an option in some situations. A good example of that is a medical emergency that will land you in the ER. Heres what you need to know to understand the costs, understand your options, and plan for these unexpected costs: Emergency Room Costs.

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Increase In Chronic Illnesses

The authors of the JAMA study point to diabetes as the medical condition responsible for the greatest increase in spending over the study period. The increased cost of diabetes medications alone was responsible for $44.4 billion of the $64.4 billion increase in costs to treat that disease.

After diabetes, conditions with the greatest increase in costs were:

Lower back and neck pain: $57.2 billion
High blood pressure: $46.6 billion
High cholesterol: $41.9 billion
Oral disease: $25.3 billion

How Much Is Medigap In Maine

Why is health care so expensive?

Plan G in Maine would cost about $205 a month. But, even when youre 90, youll have a premium equal to a person thats 65. While it may seem like a lot at first, long term, its the most comprehensive option.

Those with Medigap in Maine can switch to a different policy with the same or fewer benefits throughout the year. Maine follows community rating method laws. Premiums dont go off age, those under age 65 still qualify for the same costs as those over 65. Because of these rules, its no shock that premiums are much higher in this state.

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Recent Rollbacks + Changes To The Aca

Both official changes to the Affordable Care Act and informal and proposed changes in the last two years have destabilized the insurance industry, which may ultimately contribute to increased costs for consumers.

Official changes include the:

Repeal of the individual mandate tax

One of the concerns with the Affordable Care Act from day one was that only sick people would purchase coverage, significantly increasing insurance premiums.

However, the individual mandate and its associated penalty encouraged more people, even those that were healthy, to enroll.

At the same time, curbing the availability of non-major medical plans like short-term health insurance and Association health plans helped drive a higher number of younger and healthier people to ACA plans, which helped control healthcare costs.

Without those rules in place, the costs of claims rises and is passed on to consumers.

If enough of these seemingly small rollbacks and changes to the ACA occur, it could send the program into whatâs been dubbed a âdeath spiral.â That could ultimately lead to the end of the program as it becomes too expensive for both insurers and consumers to participate.

Some other proposed and informal changes that have also contributed to undermining the ACA and destabilizing the marketplace, include:

Healthcare In The Us Is Expensive

You dont have to go much digging to find out that healthcare costs a lot in this country.

If youre looking for specifics, though, heres an example. The New York Times recently reported that the U.S. spent more than $3.3 trillion on healthcare in 2016. That equals nearly $9,500 per American or about twice what people in other industrialized countries spend.

Its easy to blame these sky-high expenses on what hospitals or drug-makers charge. However, theyre just one part of the problem. According to a group of Harvard researchers, healthcare costs here are high across the board. Drugs are more expensive . Doctors get paid more. Hospital services and diagnostic tests cost more. And a lot more money goes to planning, regulating and managing medical services at the administrative level.

As you might imagine, insurance companies account for all those staggering prices when they calculate health-plan costs.

In other words, you spend so much on health insurance coverage because your insurer spends even more on the care you receive from doctors and hospitals.

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Is It Cheaper To Get Health Insurance Through Employer

Workplace health insurance is usually cheaper than an individual health plan. Employer-sponsored plan premiums have increased 3% annually for single coverage plans and about 5% for family plans. Those increases are much more modest than what youll find for individual health plans most years.15 oct. 2020

Is Drug Costs Making Health Insurance So Expensive

Why Is Health Insurance So Expensive? â Founder

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.

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Key Reasons Why Health Insurance Is So Expensive

The Americans pay almost four times the population of other developing countries for pharmaceuticals.
COVID-19 has raised the demand to reduce costs on our increasingly complicated and costly healthcare system . Thats why health insurance is so expensive in the USA.
Also, the prices of hospitals are rising even higher than specialist wages in the US. Moreover, hospitals, doctors, and infants are charged more than elsewhere.
In other nations, the government is at least partly responsible for pricing medicines and healthcare. Prices in the United States rely on the strength of the demand. Thats why health insurance is so expensive in the USA.
Administrative duplication is one explanation for high prices. Providers face a wide range of usage and multi-payor billing needs. Such that expensive administrative support is essential to charge and refund.

Here are some fundamental reasons why health insurance is so expensive?

Lack of accountability by the government

This may be the most difficult cause for disengagement, but the key point is this: organizations that offer health services like healthcare facilities and medicines manufacturers, like many private insurance companies, have more leverage to keep premiums up by dealing with several payers.

However, there is more incentive to satisfy the need to market their services as they have to bargain with a single-payer.