Causes of the High Cost of Health Insurance

According to the California Association of Health Plans, the United States spends more money on health care than any other developed nation. If the current rate of cost inflation continues, medical expenses in America will double between 2007 and 2017. The high cost of health care precipitates increasingly expensive health insurance costs. As private companies, health insurers exist to make a profit. These companies can only make money by charging policyholders more than is paid out to health care providers.

Doctor Salaries

• The California Association of Health Plans reports that in 2009, 24 cents of every dollar spent on health care in the United States went into the pockets of doctors. In 2005, the cost of physician services grew more than twice as quickly as that of the consumer price index. Doctors in the United States make three times more each year as those doctors performing the same functions in Europe. In order to cover the fees charged by physicians, health insurance companies must increase the cost of policies.

Marketing

• Consumer Reports asserts that the cost of medical insurance premiums grew much faster than worker earnings or inflation between 1998 and 2008. At least 12 percent of private health insurance premiums are allocated for marketing and administrative expenditures. Simply put, policyholders are paying for their insurance companies' ad campaigns, as well as administrative costs like employee salaries. Because this figure holds steady at 12 percent as the cost of insurance grows, health insurance companies charge an increased fee for marketing and administrative costs each year, causing an increase in health insurance premium costs.

American Wealth

• According to a report published in the New York Times in 2007, American wealth is largely to blame for the high cost of health insurance. The Times reports, "We are richer than other countries and so willing to spend more." The article goes on to assert that health care providers and insurance companies charge such high premiums because wealthy Americans are willing to pay. As Americans pay more for health care, specialists charge more, and as specialists charge more, insurance companies place a higher price tag on premiums, for which Americans then pay even more.