Why does insurance drive up health care costs?

How does health insurance differ from auto and homeowners insurance? What makes health care and health insurance so much more expensive?

You have insurance on your home to protect yourself from financial devastation in case a fire burns it to the ground or a hailstorm destroys the shingles.

You have car insurance both to replace or repair accidental damages, and to cover the costs for the other driver if you’re at fault.

In both cases you have a deductible of some sort. That reduces the costs in two ways:

1. The insurance company isn’t responsible for the full losses (lowering costs per claim), and
2. If the loss for a given event is small enough, you won’t file a claim at all. That reduces the paperwork and administrative costs.

What if home and auto insurance were like health insurance?

Those types of insurance are costly enough, but imagine how much more expensive they’d be if:

1. Homeowners insurance paid for your lawn care and snow removal?
2. Auto insurance paid for your oil changes and tires?

If that were the case, auto insurance companies would undoubtedly enact policy provisions to manage their costs.

For starters, they would set up networks of preferred maintenance shops that would agree to accept lower oil change payments for insured drivers.

For shops outside of the networks, insured drivers would have to pay an extra fee. This would lead to more of them using the preferred shops. 

To make up for the revenue lost on the insured drivers, the preferred shops would raise the “regular” price for the non-insured drivers. The following year that higher regular price would be the starting point for negotiations with the insurance companies. 

The auto insurance companies would again press for discounts, and the cycle would continue, with the regular prices spiraling ever upward.

The companies would establish standards for when drivers were eligible for a covered oil change and would audit the shops to determine whether they were performing oil changes too early. An oil change at 1,800 miles instead of 2,000 would lead to a penalty.

Or, if the driver was about to go on a 800-mile trip, the shop could file a pre-authorization request to justify the early oil change. If the request was denied, the driver and mechanic could appeal for reconsideration.

The shops would hire staff to ensure the accuracy of oil change reimbursement submissions, because failure to complete the paperwork properly would lead to denied payments. And the insurance companies would hire auditors and preauthorization staff.

None of this paperwork would improve the quality of oil changes. The cost of auto insurance would continually rise, but oil change costs for those without insurance would go up even faster.

Homeowner’s insurance companies would implement similar strategies to limit lawn care or snow removal costs if those were part of insurance coverage.

Restoring the Role of Health Insurance

Oil changes are a predictable need for all drivers. 

They’re not that expensive, because the market works. People who are paying for their own oil changes and snow removal have incentive to find good service at a fair price.

Health care doesn’t have to be expensive, either! Membership-based direct primary care clinics like HELPcare Clinic eliminate much of the administrative cost and complexity inherent in the current system.

The members are the judge of value, not third-party payers from government programs or insurance companies.

In the next post in this series, we’ll begin reviewing the results of how insurance distorts and inflates the cost of everything in the U.S. health care system.

Even something as simple as a primary care office visit.

To find out more about how you can restore health insurance to its proper role, request a free copy of our informational booklet, Saving Through Membership today.

Update (10/13/22 - 12:25 p.m.) - Dr. Dave and Lee Aase discussed this with John Wright this morning on KAUS 1480:

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Lee Aase

Lee Aase is the founder of HELPcare LLC, which provides comprehensive membership, marketing and management services for provider-owned HELPcare Clinics, as well as metabolic health education and coaching for people interested in restoring health and reversing disease through lifestyle changes. Lee and his wife Lisa live in Austin, MN and have six married children and 18 grandchildren.