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Reasons for High Costs in Health Insurance

The costs of health care and health insurance have risen more quickly than most other goods and services in the U.S. during the 1990s and 2000s. The rising cost of health insurance has major economic implications; in some cases families may be forced to choose between carrying health insurance and paying other bills. There are many factors that have contributed to the rapid rise in the cost of health insurance and health care.

  1. Demand for Care

    • One of the main reasons the cost of health care and health insurance increases over time is increased demand for health care procedures and the availability of new, expensive procedures and technology. According to a 2007 New York Times editorial, the U.S. tends to depend on health care specialists who "overuse advanced technologies, like CT scans and M.R.I. machines, and who resort to costly surgical or medical procedures a lot more than doctors in other countries do." Every time a new procedure, device or drug is developed, it creates potential for new demand and more expenditure on health care.

    Insurance Company Profit

    • Insurance companies are for-profit businesses. The main objective of health insurance companies is making money, not providing health care insurance that is affordable. Insurance companies price plans to maximize profit. Health insurance is considered a necessity by many people, enabling insurance companies to charge more for coverage and increase profit. Insurance companies include many stipulations in health care plans to force those covered to pay for costs such as co-pays on drugs and high deductibles.

    Obesity

    • Another factor that can increase health insurance costs is an unhealthy and ailing population. Increasing obesity rates are commonly cited as a contributing factor to the increasing cost of health care. According to a February 2010 Time magazine article, "obesity adds $147 billion per year to our health care bills." Obese people tend to be susceptible to a variety of serious medical conditions such as diabetes and heart problems, and treatments for such conditions can be expensive.

    Lack of Competition

    • The more options there are to buy health insurance, the lower prices are likely to be. When companies compete, they tend to lower prices to undercut one another, which results in better deals for consumers. In the health insurance industry, the options for health insurance are often limited to a few companies. According to Time, "customers aren't allowed to buy their insurance from a company outside their state." This leads to a lack of competition and higher overall health care costs for everyone.

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