Why is Health Insurance so Expensive?

The cost of living is rapidly increasing. Food, clothing, gas, housing; the average American pays an exorbitant amount of money each year just to get by. There’s another necessary cost that’s growing an exponential rate: health insurance.

health insurance so expensiveNothing is more important than your health, but given the astronomical costs of health insurance, many Americans are skimping on coverage – or skipping it all together. The rising costs of premiums coupled with the increased cost of every other necessity, along with wage growth stagnation, it’s no wonder why so many people are nixing health insurance completely.

The US is supposed to be the richest country in the industrialized world; so, why then, is health insurance so expensive? Let’s take a look at some of the key factors that make health insurance in the United States so excessive.

Administrative Burdens

Health insurance is a business, and like any business, administrative costs are passed off to consumers. In regard to the health insurance industry, administrative costs are exorbitant; the salaries of insurance employees, office space, and other administrative fees that health insurance companies incur are the leading reason why healthcare costs in the United States are so expensive.

The Cost of Advertising

We said it before, and we’ll say it again: health insurance is a business, and like any business, companies that offer insurance advertise to attract more customers. Guess who picks up the tab for that advertising? You guessed it; the consumer. Every time you see a commercial or hear an ad, you’re paying for a portion of that advertisement. Considering the fact that the health insurance industry is so competitive and companies want to stay on top, they can drop tens and even hundreds of millions of dollars to market their business. The money that insurance companies spend on marketing is reflected in the amount you pay for your coverage.

The Cost of Prescription Drugs

Yet another major factor that affects the cost of health insurance in the US is the cost of prescription medications. Just like insurance, Big Pharma is another big business, and they want to make top dollar. As such, your health insurance is directly affected because, yet again, these businesses rely on their consumers to make the astronomical profits they rake in each year.

Preventative Medicine

The health care industry has become very litigious. Given the sharp increase in malpractice lawsuits (whether they are warranted or not), lawsuits have become a serious concern for medical providers. In order to make sure that all bases are covered, doctors order an excessive amount of tests, despite the fact that they are positive that they can make an accurate diagnosis without them. In this way, when we say “preventative” medicine, we don’t mean medicine that is practice to prevent certain diseases; we mean medicine that is practiced to prevent litigation. Because doctors are ordering more tests than ever before, the cost of those tests directly impacts health insurance.

Increased Salaries for Medical Professionals

It’s no secret that health care professionals earn a health salary; that includes anyone who holds a certified title, such as doctors, specialists, nurses, physician assistants, nurse practitioners, etc. Given the fact that these professional provide invaluable service, combined with the fact that the cost of their education and training is astronomical, and it stands to reason why medical care providers are paid so handsomely. However, with that said, higher salaries translates to more expenses for consumers of health insurance.

The higher rate that medical service providers earn generally isn’t picked up by health insurance companies; it’s picked up by average patients through their health insurance policies.

Expensive Medical Procedures

Another factors that is driving the price of health insurance up in the US is the high cost of medical procedures. Compared to the other nations, the cost of some of the most common procedures is far more expensive in the United States. MRIs, one of the most common types of diagnostic imaging performed, costs hundreds of dollars more than they cost in another other country in the world; the higher cost, combined with the fact that the US preforms a high rate of MRIs each year, and the cost has a direct impact on health insurance.

Summing It Up

The above reasons are all factors that are driving – and will continue to drive – the rate of health insurance up in the United States. While the Affordable Care Act aimed to minimize the burden on the average American and was a good idea in theory, the plan (to put it bluntly) backfired, further driving the cost of insurance up.

While the cost of health insurance is certainly exorbitant, the bottom line is this: going without it isn’t in your best interest. There are affordable options available, and a reputable insurance agent will be able to help you find the coverage you need at a price that you can afford. While yes, insurance rates may be high, they are nothing compared to the amount you’ll pay for medical services if you aren’t insured.

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