Insurance is something you wish you never need, but it is an unpleasant fact health insurance is something everyone will eventually need. Unfortunately insurance companies are in the business of selling security against financial risk. If the general public doesn’t understand what that risk is, due to deceptive pricing or hidden practices, then the insurance or price of security is grossly inflated.

Here are three reasons health insurance is so expensive:

1. Failure to be of Value

Health insurance and coverage for all United States citizens has been in the news and on everyone’s mind lately as numerous systems of reform are debated. But the bigger issue, one that is not discussed as much, is health care’s failure to be of value. According to many economists and statistical analysts, the US health care system is both too narrow and too broad as its competition is on the wrong level.

Health care competition is too narrow when it takes place at a level of discrete service or intervention. The competition should address conditions of medical care from prevention, diagnostic and treatment to ongoing condition management. Health care competition is too broad at the level of hospital groups, clinics, networks, physician groups, networks and health care plans. The competition should take place when addressing certain medical conditions.

When addressing a specific medical condition, value is delivered to that patient. Because there are multiple units involved in patient care, it is where enormous difference can be seen in not only cost, but quality of care. Competition here gives providers that charge higher rates and allow worse outcomes to remain and thrive in business, affecting the high cost of health insurance for everyone.

2. Inflating Prices

If you ever look at a statement from your health insurance provider for a doctor visit or hospital stay, you may see a confusing array of charges, discounts and totals. And in the end, you are paying more than your fair share, according to hospitals and doctors alike. The reason? Insurance companies run by the government require a reduced price for services, which began several decades ago. Since private insurance companies want to receive equal treatment, they too insist on discounts. To accommodate the contractual price reductions, it became standard procedure to greatly inflate procedure costs.
Because of the authorized discounts, hospitals will routinely exaggerate fees for medical services, many times by hundreds of thousands of dollars, in order to have their final reimbursement come out closer to their actual cost.

3. Billing

Many individuals feel comparing health insurance policies is the way to receive cheaper premiums, but that is not always the case. One of the reasons health insurance is so expensive is billing, which is done by a third party. Many argue that health insurance is extremely complicated, and even doctors and nurses don’t seem to understand it, that having someone else navigate the road to billing is welcome. But the patients are the ones who ultimately pay for this convenience.

One could argue if insurance companies were forthcoming with their pricing, then there would be no need to have third party billing to unravel complicated coding. If you think about it, individuals purchase computers, cars, cell phones and various other goods, each with complicated plans, without the help of a third party. Having someone else pay your bills for you will always increase the price.