Why is health insurance so expensive?

Because it is not insurance!

“Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.”

Over the years what was supposed to be insurance against a significant risk has morphed into reimbursement for any and all health care expenses. This process of expanding coverage began fifty years ago and has accelerated since; culminating in Obamacare adding many new “free” benefit mandates. That’s not the purpose of insurance. Take a look at the following pages from a benefits booklet I wrote in 1977.

This plan used basic coverage supplemented by a major medical plan with a deductible and coinsurance. Even then this plan was generous, but certainly not by today’s standards.

We have been seduced into believing that all preventive care saves money and thus we should not pay for it.  We have come to believe that vaccinations for our children are not our financial responsibility nor is contraception and that a co-pay for nearly everything is not affordable. We require married, independent and employed children to be covered by parents.

None of this is insurance. The purpose used to be to help patients pay for health care related to illness and injury that was not otherwise affordable, but within limits. Today there are no limits and no health care is affordable or so we believe.

In the early 1970s my wife and I were raising four children; their routine pediatric visits, their immunization, dental and vision checkups, and prescriptions were affordable because they were essential and our responsibility. What wasn’t affordable was a vacation, a car with air conditioning, a trip to Disney World, a new TV or new bedroom furniture to replace some very old pieces.

It’s nice to know there are no limits on the amount of health care somebody else will pay for. No other insurance is viewed as is health insurance. No other insurance reimburses the way health insurance is expected to which is why the very notion of competition and market forces or consumer prudence as the way to manage health care costs is nonsense.


4 replies »

  1. I agree that health insurance has morph into anything but insurance and from my view it really started with the major shift to HMO. I am guilty because I would do anything you want if its covered and did not cost extra out of my pocket.

    I would like a history lesson. How did the HMO start and who pushed them? The insurance companies, the employers, or consultants trying to make a buck? It is clear that this genie is out of the bottle and maybe why we are in this mess today with demanding free healthcare.


    • The federal government started pushing them in 1975/76 under Nixon with a lot of funding and loans much of which was lost as many plans failed. Not unlike the ACOs today are failing. There were a few HMOs around long before that such as Kaiser plans, but the Feds created the real push in yet another attempt to control health care costs.


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