Is Affordable Health Insurance an Oxymoron?

The United States’ high-priced health care system, which includes health care and insurance, affects everyone, sick or well. It has reduced individual spending power for several decades. Salaries for American workers have risen, but net pay has stayed the same because of increasing charges for health insurance.
 
So, what exactly makes the health care system in the U.S. so expensive? It depends on who you are asking.

Doctors and hospitals blame the health insurance industry and if you ask someone in the insurance industry, they blame the physicians and prescription drugs. In reality both sides play a role in the high cost.
 
Below are just a few reasons for the high cost of health care in the United States.

1. Administrative Fees – According to a May 2020, article in Investopedia, the U.S. spends approximately 8% of its health care dollars on administrative costs in comparison to 1 to 3% in other high-income countries.
   
   Administrative costs include things like scheduling appointments, managing staff and billing for services. Medical billing alone is a very cumbersome process and makes up the largest portion of the expenses. Everything a doctor sees you for and every test they run has a unique code assigned to it. Once coding is done, they have to file with insurance and for every insurance provider there are separate rules and forms. If the provider is a government program like Medicare or Medicaid, there are more rules and regulations.
   
   
2. Drug Costs – On average, Americans shell out almost four times as much for pharmaceutical drugs as citizens of other industrialized countries pay, according to the Department of Health and Human Services. High drug prices are the single biggest area of increasing spending in the U.S.
   
   One of the biggest reasons drugs are so expensive is because drug companies are allowed exclusive rights to price and sell a new drug for a number of years in order to recoup the expenses of developing the drug. Drug companies can price these drugs as high as they like without question or justification. While generics create a competitive market with better pricing, generics are not allowed to be made until the exclusive rights time frame is completed.
   
   
3. Service Prices – Because of the complexity of our health care system and the lack of any set prices for medical services, providers are free to charge what the market will bear. The amount paid for the same health care service can vary significantly depending on the payer – i.e., private insurance or government programs, such as Medicare or Medicaid – and geographical area. For example, the May 2020 Investopedia article found that the average cost of treatment for COVID-19, plus the cost of an urgent care visit and lab tests, was $1,696, but that amount could range from as low as $241 to as high as $4,510 depending on the provider.

 
This barely scratches the surface on what makes our health care system so expensive.
 
It is even more expensive for small groups. An insurer determines a premium price based on risk factors balanced over the entire group, such as age or gender. In addition, small businesses often pay more for employee health benefits because they don't have the buying power of big employers. Health coverage providers may charge different premiums to small employers based on the industry of the employer or on the employer’s prior health claims.
 
As both workers and small employers feel the financial squeeze, fewer are able to offer, or purchase, health insurance coverage. 
 
A Solution
We know what the problems are but how do we begin to fix the problems and lower the cost of health care? Direct Primary Care (DPC) and Level-Funded health plans are both good, new alternatives.
 
The DPC movement is growing as more primary care physicians opt out of working with insurance plans. Doctors take a set monthly fee and provide unlimited primary care to individuals and families without insurance coverage being either a barrier or a factor in the care they provide. Improvements in both quality of care and access to care can be dramatic. Some health insurance plans provide DPC “wrap” coverage to provide insurance for things a DPC can’t provide – but at substantial savings to a traditional health plan.
 
Level-Funded plans are a type of health benefit plan that combines the cost savings and customization of self-funding with the financial safety of a fully-insured plan. Level-Funded plans are exempt from many Affordable Care Act regulations so plan designs can be more flexible and therefore, more affordable.

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Allied National

Founded in 1970, Allied is one of the nation's oldest and most experienced third-party administrators. Allied National is a 90 Degree Benefits Company, a subsidiary of Blue Cross Blue Shield of Alabama. As the small group benefit experts, Allied works with small business employers to provide unique and affordable group health benefits.