Why Is Healthcare So Darned Expensive? Part I

This post is the first in a series considering costs in healthcare. I plan to reflect on the roles that insurance companies, Medicare, healthcare providers, and any other factor that comes to mind play. This first post in the series will be about the role of healthcare insurance companies in increasing the cost of healthcare. All of my figures are drawn from the National Association of Insurance Commissioners.

To my eye the remarkable thing about the insurance component of healthcare costs is how consistent they’ve been since 2017. That’s true whether you’re looking at healthcare insurance company profit margins (net income divided by net earned premium):

Year	Profit Margin (%)
2010	3.9
2011	3.4
2012	2.7
2013	2.2
2014	1.1
2015	0.6
2016	1.1
2017	2.4
2018	3.2
2019	3.0
2020	3.8
2021	2.0
2022	2.4
2023	2.2
2024	0.8

or as a percentage of total healthcare spending:

Year	Insurance Costs (% of Total Health Spending)
2010	6.4
2011	6.5
2012	6.7
2013	6.8
2014	6.7
2015	6.8
2016	6.9
2017	6.7
2018	6.6
2019	6.8
2020	6.9
2021	6.7
2022	6.6

Profit margins soared during the reduction in utilization that took place but they have averaged around 3%. As a percentage of GDP insurance costs have varied from 6.4% to 6.9%. That’s so consistent my conclusion is that they are artifacts.

My tentative conclusion from that is that healthcare insurance costs are not driving cost increases; they’re following them.

Please don’t construe this as support for healthcare insurance companies. I don’t think that healthcare insurance should exist, at least not in its present form. Too many things presently covered are not insurable risks.