Who’s To Blame For Rising Health Insurance Premiums

Let’s face it.   The price we have to pay for health insurance is spiraling upwards.  Earlier this month, again, I read an article placing the entire blame of the “greedy” health insurance companies. 

Obviously, Mr. Obama has done a good job uniting a very vocal group of people to the “evils” of the health insurance companies.  According to them, the health insurance companies are the sole reason the US health care system sucks.

Prior to 2008 when Mr. Obama started his presidential campaign, the rising cost of health insurance was treated by America the same way other commodities were.  People grumbled about it but they had the option to either pay the premium or pay the doctor and hospital directly.  There were no people claiming that health insurance is a right and demanding government interference.

In less than a year, the man who was supposed to unite the nation succeeded in dividing the nation in such a way that has not been seen since the Civil War.  Two years ago, the high cost of health insurance was something that Americans griped about to their friends and co-workers.   Today, activists make threats to politicians.

Who’s to blame for escalating high health insurance premiums and what are our options?

Health Insurance Companies

Health insurance companies are just one of the factors involved.  Right now, they are congress’s kicking boy.   Before them congress was kicking the banking industry and before them it was the oil companies. Before that it was long distance telephone companies. Major League Baseball was in there at some point.  Politicians will do anything to get a headline or photo op.

Health insurance companies are not feudal land owners.  They merely provide an optional service.  They facilitate the paying of medical bills for their membership.  The premium money they collect goes to pay 3 things.  They collect enough money to pay the anticipated medical fees for their members charged by doctors, hospitals and pharmacies.

After all, their whole purpose for being in business is to collect smaller amounts of money from people in average health to pay for the medical bills for those who are unfortunate enough to need serious medical care.

 They collect enough money to pay the overhead required to allow them to do their job. Somebody has to maintain their records and pay the medical providers.

Like any business in a capitalistic society, they look to make a profit.  After all the medical bills have been paid an employee wages have been accounted for they want to have something left over.  In a capitalistic society, the profit motive is the only reason to remain in business.

The insurance companies may be looking for more profit than is necessary but if the concept of profit is removed entirely, many insurance companies will simply close their doors.

Medical Providers

Although I know the health insurance companies set the premiums, it is very hard for me to place all the blame for the rising cost of health care on them.

Last week, I went to my optometrist to have my eyes examined.  The office fee, after a $ 55 discount was still $ 159.  I remember when a visit to the eye doctor was only $ 30 and that was considered high.  After I left the doctor’s office I went to buy a new pair of glasses.  The very lowest cost I was able to find was $ 170 for one pair, without all the fancy add-ons.

That is $ 329, minimum, for something as simple as glasses.

I have to ask myself, since I elected not to use insurance but pay directly out of pocket, why the bill was so much.  Is it worth it?

I have to remind myself, the doctor who saw me paid over $ 100,000 for her education and spent 8 years in school so she could correctly treat my eyes.

In addition, no one gave her the equipment, machines and supplies she has to use to take care of my vision.  She is required to pay for that herself.

The offices, including the waiting room are professionally decorated to help soothe the nerves of patients.  Unfortunately, they are not free.  She had to pay for those.

The office staff that works for her does not work out of the sole goodness of their hearts.  Although they are kind and compassionate with patients, they expect to be compensated for their time.

In light of all those expenses, the $ 159 she charged me is a mere pittance.  She has to treat many patients at $ 159 a person to pay her overhead.  The weeks where she makes more money than the bills require, she is able to keep the extra.  The weeks she does not see enough people to earn enough to pay the bills; she still has to pay the bills out of her own pocket.

That is just the latest experience I have had with the medical community.  It is a minor one.  The profit margins for other medical providers are even higher.

Lest anyone think that I begrudge people in the medical profession from earning a profit, I don’t.  Doctors and hospitals have bills to pay, just like I do.  In light of all their training and personal risk, they deserve a higher standard of living than the average person, in my opinion.

With that being said, however, it must be recognized that their increasing fees contribute to the increasing premiums health insurance companies charge.  If the fees charged by medical providers were not increasing faster than national inflation, neither would the amount health insurance companies are required to collect to pay for those fees.

Population

In addition to the desire for profit from both the health insurance industry and medical providers, the average American needs to accept some of the blame for rising health insurance premiums.

The health insurance I grew up with did not offer doctor office co-pays or prescription cards.  It was relatively simple.  If you went to the doctor or pharmacy, you paid them cash and sent in a claim form to be reimbursed 80% of the bill.

For my parents, before WWII, things were even simpler.  Health insurance, if it was even available, was typically only available for the wage earners in the family.  It was designed to help dad get healthy enough to get back to work and earn an income for the family.  If the kids got sick, grandpa and granny just paid the doctor or hospital out of what they had.

When my grandparents were children, there was no such thing as health insurance.  Physicians, in their day, were not elevated to the level of demigod.  They were just another member of society and earned incomes commiserate with their societal position.  They were no better or worse than any other contractor in the community.

The evolution of both the medical profession and health insurance over the last 100 years has been phenomenal and it appears it will not stop anytime soon.  The population has demanded that health insurance companies cover more people and more expenses than ever before.

Unfortunately, health insurance companies are required to collect more premium from members as they cover more things.  The populations demands that health insurance companies pay for more things has contributed to the increases in premium.

Government

Insurance is regulated by both federal and state governments.  Even before the 906 pages of Obamacare, state governments regulated how much health insurance companies were mandated to hold in reserve to pay for medical expenses for members.

Each state also regulated the premiums that an insurance company was allowed to charge.

When it comes to price regulation, there really are no new concepts in the PPACA.  The difference is that the federal congress has interfered with the state’s existing rights to regulate insurance.  States are still free to regulate the premiums for health insurance but if the Secretary of Health and Human Services disagrees with any state’s decision, she has the legal right to overrule them.

Options

Right now, you have the option to either pay the health insurance premiums you are offered, shop around for a different insurance plan or retain the risk of medical costs yourself and pay the doctor directly.

In 2014 you will have no options.  This is the first time in history that Americans will be mandated to purchase a commodity.  In 2013 all Americans, with the exception of a very few, are mandated to enroll in a government dictated health insurance plan to begin in 2014.

Today, the marketplace helps determine a fair price.  If health insurance companies increase their premiums too much, they will drive away customers to their competitors or people will just elect to pay for their medical expenses themselves.

Starting in 2014, when Obama’s mandate goes into effect, the option for the market to help hold premiums down will disappear.  Health insurance premiums will only be limited by the Secretary of Health and Human Services.

If that unelected political beaurocrat is a consumer advocate he/she can restrict premiums.  If, however, he/she is pre-business, he/she can allow premiums to escalate to whatever level the insurance companies want.

Since the Secretary of HHS is a political appointee and not an elected official, there is nothing the public can do or say that will directly influence premium rates.