Insurance is the Cause – Not the Cure

Healthcare and healthcare insurance costs businesses and individuals huge portions of their earnings every year. Last year alone during a slow economy a new study conducted by the Kaiser Family Foundation estimated that the cost of employer furnished healthcare insurance grew 9%, and a whopping total of 113% over just the past decade.

That compares to an inflation rate of 27% and 34% higher wages over the same time. The employer contribution is more than double that of employees, but worker contributions are increasing faster, rising 131% the study found.

Company provided health insurance for the families of workers now costs on average more than $15,000 annually per employee, more than the combined cost of food, clothing and entertainment. This unwieldy cost burden is the main reason why employers are either not hiring new workers or dropping coverage altogether for employees.

Part of the increased cost is due to the new Obamacare requirement which mandates coverage for preventive medical care and allows families to continue coverage for children up to age 26. Most of the increases, however, are due to other factors such as more and more people enjoying full coverage benefits together with the rich premiums and profits going to the insurance companies.

In 2001, 67% of small companies with fewer than 200 employees offered healthcare insurance. Now, in 2011, only 59% provide coverage. Most large firms still provide healthcare insurance, but more companies and employees are agreeing to higher deductibles in order to reduce premium increases.  

Insurance providing full coverage for every ailment and every medical procedure is the main reason why the cost of healthcare is spiraling out of control. Obamacare will only add to the rising costs by mandating that everyone have full coverage benefits. When everyone has full coverage without exclusions the costs can only go up. 

People who pay sky high premiums for full coverage have no incentive to keep costs down. When a family is paying more than $15,000 per year for insurance they’ll insist on getting their monies worth. That means going to the doctor for every sniffle and hangnail. It means ordering every possible diagnostic test and the most expensive medical procedures available. Human nature dictates constant and rising demand when cost is no object.

Insurance is the biggest drag on the administration and cost of health care. When full coverage insurance is mandated for all, it will only result in a bonanza for insurance companies, their legions of employees and stockholders.

Insurance companies are the middleman in the health care business. They’re in business to make a profit. The more customers, the more profit. The more customers, the more employees, and the higher the healthcare administration costs.

Why pay a middleman for every item of medical expense, plus a substantial amount more for profit? If full coverage grocery insurance were mandated for all, for instance, what do you suppose would happen with the costs of food?

The costs of healthcare in America remained stable and mostly affordable to all until the advent of employer provided healthcare insurance benefits brought about by large labor unions in the 1930’s. As the demand for full coverage benefits provided by insurance increased, so did the costs of healthcare, until now the hue and cry is for every living soul to have full coverage insurance benefits.

Healthcare costs will not begin to decline until full coverage insurance benefits are eliminated and replaced by sufficiently high deductible coverage which provides the necessary incentives for individuals to keep costs down.

Deductibles should be high enough to discourage people from trying to milk the system. If people are required to pay the routine costs of their own healthcare, market competition will arise naturally to contain those costs. We could still provide Medicaid and Medicare for the poor and elderly.

The original and logical purpose of insurance in the first instance was to spread the risk of unlikely but catastrophic events – not to pay for the everyday expenses of living. Since premiums for catastrophic insurance are low, the cost of medical insurance could be affordable and the cost of medicine reasonable.

So, the cure for rising medical costs: get rid of full coverage insurance benefits.