Why Health Insurance is So Expensive ...

Where to begin !  Well, how about 1975.  If you're old enough to remember dancing to disco music in the 70s, you remember back when nobody used their health insurance. Almost everybody had insurance, because almost every employer provided it.  But nobody used it.  Unless they were really, really sick, of course. Why ?  

Lots of reasons, actually.  But first, let's re-read that part about every employer providing health insurance.  Say what?  Yes, it's true.  Not only did they provide it, but most employers also paid 100% of the cost for employees AND dependents.  That benefit is a distant memory for millions of today's employees, isn't it.  So why aren't employers willing to pay for our insurance anymore, if they did back then?  The answer is pretty simple - because they could afford to pay for health insurance back then.  Today they can't.  Read on.

In 1975 a typical employer paid about $15.00 per employee, per month, to sponsor a group health insurance plan.  It cost him less than 4 hours extra pay per month, per employee, to provide health insurance.  He was paying skilled union labor about $4 per hour, and insurance cost him only $15 per month.  He could AFFORD to pay for his employees' health insurance, because the cost was so minimal.

So that explains why most employers provided insurance, but it doesn't explain why nobody used their insurance.  Remember, we said everybody had insurance, but nobody used it.  So now we'll give you a glimpse into the past. 

Back in 1975, everybody had the same kind of coverage.  An insurance contract covered necessary medical care, but it didn't cover preventive care.  And every policy had a $50 calendar year deductible. Voila!  There's your answer.  People weren't willing to spend their own money to see a doctor, unless they absolutely had to.  In 1975 there was no such thing as a doctor visit co-pay.  So everybody had to pay out of pocket if they made an appointment with the family doctor.

Now in 1975 a doctor visit used to cost only $10.  But considering that the federal minimum wage at the beginning of 1975 was about $2.00 per hour, if you weren't lucky enough to be making $4 per hour skilled labor pay, it could cost four or five hours pay for that visit. So instead, if you didn't feel well you got into bed, and somebody fed you chicken soup until you got better.  People just did not go to the doctor, unless they were pregnant or needed stitches. And then the family doctor would care for you. Children weren't carted every year for routine well visits and for every sniffle.  Most children lived an entire childhood without ever seeing the inside of a doctor's office. And somehow they survived to adulthood. 

That might sound corny, but let me translate that into a language you'll understand. There were no medical claims. No claims meant no dollars billed to the insurance company. No dollars billed to the insurance company meant that the insurance premium stayed the same, year after year after year. And it did. $15 per month.

Listen very carefully, because this is the important part. If there were no claims at all, there would be no reason to have health insurance. And logically, the fewer the number of claims filed, the less money the insurance company has to charge in order to be able to write checks to pay those claims. Think it through ! The fewer checks they have to write, the smaller the number of dollars they have to collect from each person who has insurance with them.

Is the light bulb coming on yet ? Then stay focused a little longer. If today there were still the same number of claims filed per person as there were in 1975, then employers should still have to pay only about 4 hours wages per month per employee for health insurance. Makes sense, doesn't it ? Well, that 4-hour figure actually held true for an entire decade beyond 1975. In 1985, the average monthly health insurance premium billed for an employee group plan was $45 per employee. And in 1985, average skilled labor pay was $10-12 per hour. Do the math.

So if, from the beginning of health insurance creation all the way up until 1985, there were no claims and insurance cost employers only 4 hours pay per person per month, then what on earth happened to health insurance in 1985 to change it forever and send it on a path hurtling toward impending disaster ? Would you believe ... an apple ?

Seriously, (well maybe somewhat tongue in cheek) a very large apple logo was suddenly plastered on billboards all over Jacksonville, Florida in 1985 when the very first HMO, named Florida HMO, was introduced in Duval County. This was a mysterious new concept, never seen before, and insurance companies were heavily promoting it with promises of doctor visits for only $5 and prescriptions for $2 - all with no deductible. All you had to do was go to a doctor or drug store in the HMO network. People scratched their heads in disbelief. Could this be true ?

It didn't take two minutes for people to decide to try it out. In droves. Previously, mothers with babies and young children took them to the county health department for free immunizations at recommended intervals. But now they decided to take them to the doctor. The county was free. The doctor wasn't. But moms didn't care because it was going to cost only $5.

Previously, when the baby had a diaper rash, Mom would treat it with ointment she bought at the grocery store. But now she carried the baby to the doctor's office, paid $5 for a visit, and got a prescription diaper rash ointment for only $2. And she felt a delicious new equality with high society.

And so it went ... claims began flooding into insurance companies in astonishing volumes because suddenly people didn't have to be personally accountable anymore for the cost of their medical care. Employers paid the premiums, and employees paid almost nothing for care.

HMOs eventually evolved into PPOs in an effort to move some of the cost back to the patient and to create a choice of doctors. But PPOs made the situation even worse. Worse ? How could it get worse, you ask ?

Well, unfortunately greed started creeping into the picture. With HMO plans, doctors couldn't make extra money by seeing patients more frequently. They were paid on a capitation system ... long story, but take our word for it. More patient visits meant more work, but no more money. However, PPO plans were a different animal.

With PPO plans, doctors could bill insurance companies for each and every patient visit. And it occurred to certain entrepreneurial doctors that patients could afford to see them more often now, because they paid just a small co-pay. And those doctors began seeing dollar signs elsewhere ... in insurance company coffers. They realized that if they could see a patient once or twice a year instead of once or twice in a lifetime, they could generate lots more dollars flowing into their bank accounts. So they began to insist on follow up visits after initial treatment of an illness. And they began to require that patients come in twice a year if they wanted a prescription refilled, instead of just once a year. Some of them began to require four visits a year to get certain prescriptions refilled. And then they added visits for lab testing, and then visits to discuss the results of the lab testing. And on and on and on. Every time a patient walked through the door, another charge was billed to the insurance company.

But the greed didn't end there. Pharmaceutical companies wanted their slice of the money pie too, and they began lobbying congress furiously to be allowed to advertise their drugs. Think back ... before the late 1990s you never saw an ad on television for a prescription drug. They weren't allowed. When drug companies were finally granted permission to advertise, your living room was suddenly inundated with drug ads. Those soothing voices encouraged you to ask your doctor for Claritin ... ask your doctor for Prevacid ... ask your doctor for Viagra ...

And people, like sheep being led to the slaughter, began doing just as they were told. After all, it wasn't going to cost them anything but a small co-pay to do so, right ? Oh how wrong they were. Dead wrong. In the end, it ended up costing not only them personally, but costing everyone in this country, affordable health insurance. Why ?

Again, we ask you to think about it. If you used to buy Sudafed for $5 at the grocery store, it cost your insurance company nothing. But if you switched to Claritin, (even though it doesn't work any better than Sudafed) because it cost you only a $5 co-pay, your insurance company was now being billed the balance of the cost of your Claritin. When Claritin was first introduced, the bill was in the neighborhood of $70. So if 100,000 people started using Claritin instead of Sudafed, suddenly insurance companies had to write checks for an additional $7 million every single month. That's one drug, one month. Just because people saw an ad urging them to ask their doctor for a prescription that did nothing more than Sudafed. And the pharmaceutical companies laughed all the way to the bank.

So we've just shown you how a handful of people, using one drug, added $84 million to the total amount that insurance company had to pay out in claims in one year. Now multiply that by millions and millions of people using numerous drugs. And then add to that the fact that pharmaceutical companies weren't even willing to stop there in their quest for a bigger slice of the pie. During a 10-year period, while the average rate of inflation in this country was 1.5% to 2.5% annually, pharmaceutical companies continued to gouge us and our insurance companies by increasing the cost of drugs on average 10% to 15% annually. Their greed apparently has no end.

Pharmaceutical companies are largely to blame for the astronomical increases in health insurance premiums over the past ten years. But there's more. Don't think for one minute that hospitals haven't also jumped on the band wagon.

Remember when hospitals used to send us itemized bills after we were treated ? Well they don't anymore, and they haven't for many years. Why ? Because people were outraged back in 1995 when they saw that hospitals were billing insurance companies $3 for an aspirin and $12 for the box of tissue next to the bed. So hospitals stopped showing us what they were billing for their "services" and started sending us balance-due statements instead. And meanwhile they raised prices again and again, even to the point of surpassing pharmaceutical company greed.

Hospitals now charge on average 300 to 1000 percent over the actual cost of every service they provide. Those numbers are not erroneous. But here's the kicker. The federal government allows hospitals only 4 to 5% over cost when paying Medicare claims for seniors. The government says that's enough money to enable hospitals to make a small profit. Remember, hospitals are all in business as non-profit or not-for-profit organizations. So how are they getting away with billing insurance 300 to 1000 percent over cost ? Good question.

The answer ? We've all sat back and let them rip us off blind. Hospitals and pharmaceutical companies and doctors are literally stealing money out of our pockets and bank accounts by driving our insurance premiums up so high that many of us have had to cancel insurance entirely because we could no longer afford to eat if we kept paying for it. Over 40 million people in this country are now uninsured, and the number continues to grow every year.

But insurance companies don't help the matter at all, in that sometimes the decision makers seem to lack common sense. Example: When a woman finds a lump in her breast, she doesn't need a mammogram to tell her it's there. She already knows it's there. She needs a biopsy to determine if it's cause for concern or not. But the insurance company won't let her get a biopsy first. Seriously. She MUST get a mammogram first. And if she doesn't follow insurance company "protocol" they won't pay her claim. So she first has to incur a $150 claim for a mammogram to prove that she has the lump she already knows she has. So now she can get her biopsy, right ? Nope. Not a chance.

After she has the mammogram, she still can't have a biopsy yet, because, according to insurance protocol, she has to next be referred for an ultra-sound so a specialist can see a different picture of her lump, which costs another several hundred dollars in claims. Only after she has the ultrasound can she finally be referred for the biopsy that she knew needed all along.

Oh, and so you have an idea of how women and their insurance companies are getting ripped off for that procedure, as of October 1, 2008 a Green Bay, Wisconsin hospital was charging patients $3,696.00 for the use of a room for less than an hour. That doesn't count the separate bills that come in from the pathologist ($171), the radiologist ($3,154), the anesthesiologist, the attending physician ... you get the idea.

So do you still wonder why health insurance premiums now cost employers more than a full week of additional pay per employee, rather than just 4 hours pay per month ? We're guessing that you have a clearer picture of the problem. Your next step is to decide if you want to be a part of the solution. You could always drop out of the health insurance picture entirely and hope you never have an accident or get sick. But we've come up with a better solution than that.

We've devised a method, ingenious we believe, to force claims costs back down for our members.  Thus we can save you a small fortune compared to what you're currently spending on health insurance premiums.  "How?  Two methods actually ... by giving you financial incentives to get yourself in optimum health and to stay that way.  And by building financial deterrents into the plan we designed for our members to prevent you from unintentionally causing unnecessary expenses, which would be detrimental to all of us.

Our goal is to educate you on what needs to be done to restore our health insurance industry back to good health, and then give you incentive to act on what you learned. To begin getting some of that education sooner than later, it might not be a bad idea to click here

Health insurance is broken, but we intend to be the ones to fix it, at least for our own members. We plan to make outrageously expensive insurance premiums passé.