Why Does Health Insurance Keep going Up

To say that medical insurance is expensive is an understatement. Though the solution is heavily debated, there is a consensus that insurance premiums are driven by the rising cost of health care services and pharmaceutical drugs.

Based on National Health Expenditure Accounts (NHEA), health care spending in the United States:

• Grew 4.6% in 2019 to $3.8 trillion compared to 4.7% in 2018
• Is projected to grow an average of 5.4% per year between 2019 and 2028, reaching $6.2 trillion by 2028
• Varies considerably by location, with the New England and Mideast areas at the highest levels and the Rocky Mountain and Southwest areas at the lowest levels of health care spending

Health care spending influences

The Journal of the American Medical Association (JAMA) published five fundamental factors associated with increased health care spending in the U.S.:

• Population growth
• Aging
• Disease prevalence or incidence (Some conditions, such as cancer and injury, are tied to incidence versus the number of doctor visits or days as an inpatient.)
• Utilization of medical services
• Service price and intensity (spending per visit)

Why U.S. health care is so expensive

A John Hopkins study found that “the United States, on a per capita basis, spends much more on health care than other developed nations; the chief reason is not greater health care utilization, but higher prices.”

From the perspective of health care professionals, shared in a 2020 article published in Today Health, reasons for these higher prices include: 

• Health care is a for-profit model, administered chiefly by private insurance companies, putting the onus of payments on individuals versus public agencies.
• Health care is treated as a privilege versus an entitlement.
• There is no guaranteed access to health care that protects you from financial hardship.
• The costs for the underinsured tend to shift to the insured.
• Because of the health care system’s complexity and fragmentation, administrative costs are high, 34.2% of national health care costs in 2017.
• The U.S. has a fee-for-service model, which promotes tests and procedures more than measures to help people stay healthier.
• Health care providers have more clout to keep costs high when negotiating with private insurers versus a single government agency.
• Competition between insurers can drive premiums down, but a competitive environment is nonexistent in certain locations serviced by only one or two health insurance companies.

How to get help with health care costs

If you need help paying insurance premiums, remember that the Affordable Care Act (ACA) expands access to U.S. health care through the Health Insurance Marketplace. When you enroll in a plan through the Marketplace in your state, you can apply for a government subsidy. If you qualify, your premium may be reduced. 

Open Enrollment for 2021 starts November 1. Apply by December 15 to ensure your coverage begins January 1.