Health Insurance – The rise of costs and fall of benefits

Health insurance increases are almost as reliable as death and taxes.

In 2020, group health insurance premium costs increased 4% amounting to $21,342.00 for an average family plan.

But where are these cost increases coming from? Let’s break it down! Here is a deep dive into the top eight trends driving the rising costs of health insurance in America today.

  1. Increasing Medical Costs

    This is the root cause of the rise in health insurance costs. The Centers for Medicare Services (CMS) projects national health spending will increase at an average rate of 5.5% each year between 2018 and 2027-eventually reaching $6 trillion dollars.

  2. Medical Providers are rewarded for doing MORE (rather than being efficient)

    Most insurers, including Medicare, pay doctors, hospitals, and other medical providers under a fee-for-service system that reimburses for each test, procedure, or visit. This can incentivize the medical industry to order more services than are needed. On top of this, the mainstream medical system is not integrated, which leads to repetitive tests and over-treatment.

  3. Rise of chronic illness and obesity

    Did you know that 6 out of 10 adults in the U.S. have a chronic illness/condition such as asthma, heart disease or diabetes? 4 out of those 6 have 2 or more chronic illnesses/conditions. These factors, along with an aging population drives up costs.

  4. Healthcare is NOT consumer-centric

    Another contributing factor to rising health insurance costs is that most people do not pay directly for their health insurance … it is often the employer fitting the bill. As a result, many people do not consider costs as they evaluate treatments and services.

  5. Lack of Cost Transparency

    Even if consumers wanted to consider costs, lack of price transparency makes this difficult. There is no quick way to understand treatment options and the costs that would be associated with them, and medical billing is often difficult for most people to understand.

  6. Pharmacy Costs are Skyrocketing

    A huge trend influencing the rising cost of health insurance is the ever-increasing costs of pharmaceuticals. The median cost for generic drugs rose 37% from 2019 to 2020. Many or left with having to pick and choose what they feel are the most important prescriptions versus what is most cost effective. This is certainly and dangerous slippery slope! The side effects from one Rx results in you needing to take another, the new Rx contraindicates with a long-standing Rx etc. etc. … the headache of what to take and not take compounded by the worry of what can I afford to pick up from my local pharmacy causes many people to eventually just “go without” in the long run. This poses multiple negative results.

  7. Carrier Consolidation

    Carrier consolidation reduces competitive price pressure, which has resulted in higher costs. For example, the 6 largest health insurance companies own most of the market. New startups like Oscar Health have just 1% of market share and will be hard pressed to compete.

  8. Fewer Plan Options & Smaller Provider Networks

    Finally, health insurance companies know they must control costs somehow to cover more people. While they do this somewhat effectively given all the upward price pressures we have now discussed, this control comes at a cost to the consumer. Many carriers end up limiting the number of plans in their portfolios and the provider networks within each plan. This causes consumers to have to choose a plan with fewer benefits and even fewer providers to choose from … all while paying higher monthly premiums than ever before.

 

Health Insurance  Candice L. Operations Director

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