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The Hidden Cost of Private Health Insurance

Updated: Jan 19

Ooooooook, so we (Americans) spent 3.5 trillion on healthcare in 2017. Do you know what 3.5 trillion looks like if you write it out?


3,500,000,000,000.0


That's a lot of zeros.... AND that's more than we spend on food! Digest that for a minute.


So how does that $3.5 trillion get paid?


The Centers for Medicare & Medicaid Services (CMS for short) reports that of the 3.5 trillion three major sources covered the majority of the bill.

  1. 37% was paid by Medicare/Medicaid.

  2. 34% was paid by private health insurers (think BCBS, Aetna, UnitedHealth, etc).

  3. 10% was paid out-of-pocket.


Let's talk about private health insurance for a moment.


$1.19 trillion (1,190,000,000,000.0) was covered by private health insurers! Thank goodness we have insurance right!?! But wait, where did that 1.19 trillion $$$$$$ come from?


Well, mostly our insurance premiums, BUT ALSO employer contributions which are seen as kind of a job bonus that, at the end of the day, are considered a part of our salary. So again, it looks like we are paying for it in one way or another.


Reminder: That's just private health insurers. We (employers included) also pay medicare and medicaid tax right out of our paychecks which accounts for 37% of that 3.5 trillion. So who is paying for all those healthcare costs? Say it with me. WE ARE! All 3.5 trillion!


I got off track a little bit, back to the point at hand because there is another bill we are footing.


Thanks to the 80/20 rule (85/15 in some cases), insurers can't (legally) rob us blind. Or can they? Working backwards from the ol' 80/20 rule, some simple math tells us that private health insurance is making about 290 billion or 290,000,000,000.0 (PER YEAR!) in revenue. Sure, it may cost a lot to run a company but what I am looking for, and not finding, is the value.


So if we are paying private health insurers a net $1.38 trillion every year to cover our healthcare costs what are private health insurers doing to earn the 290 billion yearly revenue?


Insurance right? Right!?


I'm not seeing it, at least not since insurance became a form of payment instead of actual insurance. You know, the thing that is supposed to protect us from financial ruin after a health crisis.


From where I am sitting, It looks like the only clear outcomes of our beloved private health insurance include:

  • Driving up healthcare costs across the board (for profit)

  • Making healthcare pricing completely unintelligible (for profit)

  • Acting as a middle man to our health care (need I say it ... for profit)


All of these things have made shopping for and dealing with healthcare directly a nearly insurmountable process for us as individuals and eliminates competition among providers. Choice and competition are two essentials for a fair marketplace and I don't see any evidence of either.


So, where is the insurance? And where is the assurance that insurance is supposed to provide?


I can't find it...


~ Erik Malone, D.C.

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