Because health insurance is expensive, many people seem to believe it's because health insurance companies are earning increasing profits. This is generally not true. Health insurance company profits are generally down, in some cases dramatically so.
How can this be, if they're charging much more for health insurance every year? It's because the cost of covering the health care of Americans is rising much faster than the increase in health insurance premiums. There are several reasons for this.
1. There is a huge increase in the number of uninsured or indigent people using emergency rooms for basic health care because emergency room rules prevent hospitals from turning people away due to inability to pay. This is the most expensive way of treating these people, but because these people know they won't have to pay, they have no incentive (other than absurdly long waiting times) to avoid using the emergency room this way. Because the hospital is stuck providing these services without being paid by either the patient or an insurance company, these costs are spread out to other services provided by those who can pay: insurance companies, or honorable uninsured people who go to the hospital and pay the bills out of their own pocket. I was told by someone I know who spoke to a large Portland hospital that he believes medical care costs at least 30% more than it should due to this kind of emergency room "free pass" utilization. In other words, when you have a $5,000 shoulder surgery, it really should only cost $3350 or so, but the hospital has to add $1650 to cover all the deadbeats they have to treat.
2. Insured individuals tend to over-utilize doctors and hospitals. I know several people who go to the doctor 15 or 20 or even 30 times per year, simply because it's virtually free for them to do so. To them, a visit to the doctor isn't $400, it's $20, and a medication isn't $90, it's $15. If they were paying the "real" cost of utilizing these services or medications, they would not go as often, but some actually feel "Well, I'm paying for this insurance so I'm sure going to use it" and not only go more often than if they had to pay for the doctor visit, they actually go more than they would if medical care and insurance were free.
3. Treatments are becoming more exotic, and patients will not stand for anything less than the best. When it comes to choosing cars or homes or clothing, many people will make more economical choices, but when it comes to repairing their child's brain injury, or their own heart valve problem, or especially problems like cancer and HIV, everyone wants the most advanced option available. You can't really blame people for this, but as treatment options (equipment, drugs, analytical tools) become more exotic and expensive, the range of treatments become more expensive. This is more true when it comes to serious illnesses or injuries as I mentioned above, but treatment options even for less significant problems are more expensive than ever, and generally nobody wants to skip the MRI due to cost and just stick with an x-ray, at least if they're insured.
4. The risk of lawsuit for medical malpractice is so high that malpractice insurance eats up a gigantic portion of each doctor's and hospital's income. Anecdotally, I heard that one local psychiatrist earned over $400,000 per year, a tidy profit minus $20,000 per year for office rental and $150,000 per year for malpractice insurance. Holy crap! Obviously this doctor could charge less for his services if he eliminated or reduced the malpractice insurance. In other countries, malpractice lawsuits are a much smaller part of the picture, or even nonexistent.
5. Americans in general are eating too many calories, too much sugar, not exercising enough, smoking too much, drinking too much alcohol, getting too fat, and these problems are becoming worse very quickly. People with these problems have more health problems, both trivial and serious, and require more hospitalization, more surgery, more ambulance rides, and by a huge margin more prescription drugs, than ever before.
The average American's health care expenditures have increased over the years, and as more and more people are uninsured, the average per-person cost for the insured rises even more dramatically, even adjusted for inflation. The ironic thing is that everyone thinks the health insurance companies, the hospitals and the doctors are all getting filthy rich, keeping 90% of what they bring in, and while there are some profits being made, it's nothing like what people think.
