Reasons for Higher Health Insurance Rates

Health insurance premiums in the United States are higher, both historically as well as compared to other developed countries. Many reasons exist for the cost inflation in health care, including an aging population, substantial liability costs for health care providers and, as counter-intuitive as it may sound, more advanced techniques and medicines for the treatment of illness.

Aging Population

• The older we are, the more medical treatment we require and the more someone has to pay for such treatment. The United States has a rapidly aging population as baby boomers cross over from a middle-aged to an old cohort. Not only do older people get ill more often and experience a larger number of chronic health problems, but their care and treatment is often more expensive. Where a young patient may be sent home after spending one night in the hospital following minor surgery, an elderly individual may have to be kept under observation for several days. Certain interventions, which would be a simple outpatient procedure when dealing with a young and healthy individual, may also have to be performed at a full-service hospital if the patient is relatively old. Since many health insurance plans cannot discriminate on the basis of age, race and similar factors, especially in employer-based group plans, it is often impossible for insurance companies to charge elderly patients higher premiums. Therefore, the cost for everyone goes up as the average age of the insured increases.

Liability Claims

• Medical malpractice cases, like almost all lawsuits, are more common in the United States than almost anywhere on earth. Within the U.S., liability-related costs in health care have been rising and are expected to further increase, according to a report published by Aon Risk Solutions. This has a negative influence on health insurance premiums in two ways. First, doctors must insure themselves against liability claims and are paying ever-higher premiums for it. They must pass this cost down to the patient as well as the patient's insurance company, resulting in increased health insurance premiums. Second, doctors take preventative measures to avoid liability, which inflates their costs, and in turn is passed down to the consumer as well. This often takes the form of excessive diagnostic exams such as extra MRIs, additional x-rays and redundant referrals to specialists, just so the doctor can demonstrate in a potential lawsuit that he investigated all possibilities.

Advanced Technology

• Medicine is one of the very few sectors in the economy where better technology results in increased costs. An MRI machine is far more expensive than an x-ray device, and a patented drug costs far more than a generic medicine. As such technologies become more widely available, doctors can save more lives, but the overall cost of health care tends to go up.

Unhealthy Habits

• It is no secret that America is the fattest nation on earth. This leads to a host of chronic health problems and raises the cost of health care substantially. The incidence of high blood pressure, diabetes and heart disease increase as we gain weight, and since insurers usually cannot charge obese patients more, premiums must go up for everyone.