Healthcare Absurdity: The Unhealthy Relationship with Insurance
The health insurance industry is so deeply embedded in the delivery of healthcare that many believe they must have insurance to afford care. Even healthcare providers assume the only way to make money is through health insurance reimbursements.
Health insurance today seems more like an expensive necessity, rather than a viable option to mitigate your financial risk. Ultimately, people either purchase health insurance and hope they have few out-of-pocket costs, or refrain from purchasing insurance and hope they stay healthy.
What if other forms of insurance were similarly entrenched in their respective industries?
Your home window is cracked? Don’t order a new pane online, call your insurance company. Your car tire bursts? Don’t purchase a new one at the store, call your insurance company. Your faucet leaks? Don’t buy a new O-ring, call your insurance company.
Using insurance for every non-catastrophic repair seems ridiculous, but that is how health insurance currently operates. Even if you agree, you may still argue that one cannot just go out and buy a knee surgery. Medical procedures and services are simply unaffordable without insurance coverage!
Couldn’t this be the result of no free market for healthcare?
Home and auto repair exist in the free market. You can easily find different suppliers, contractors, mechanics, etc. with a range of quality and price. They market their services directly to, and receive payment from, consumers. This makes non-catastrophic repairs (like those for cracked windows, burst tires, and leaky faucets) less expensive because there is free market competition.
Instead, the vast majority of people use their health insurance for every service under the sun. Consultations, check-ups, diagnostic imaging, surgery, physical therapy, and so on. Consequently, healthcare providers must deal with insurance companies so they can get paid for their work.
They deal with coding and administrative mandates, billing and administrative overhead, being dropped from provider networks (which means significantly fewer patients), and reimbursement collection issues. All of which are due to excessive health insurance involvement in the healthcare industry. The result is hefty costs thrust upon providers and less time to focus on care, which makes their services, and consequently healthcare, more expensive.
To top it off, there is a severe, industry-wide lack of upfront price and quality information. This makes it exceedingly difficult for people to pick the highest quality healthcare provider in their price range, and for those providers to appropriately market their services.
So, what if you could purchase care directly from healthcare providers?
Providers would no longer have to cope with the previously mentioned health insurance headaches. They could actually charge less for their services while preserving their profitability, independence, and sanity.
Anyone could find and compare doctors in their area that offer the necessary procedure/service, know the quality and total cost upfront, and purchase that care just like they would a window, tire, or faucet.
Free market competition and transparency drive down costs and create a range of quality and price options for every budget. Healthcare can be affordable without insurance!
No way. Even if there was a free market for healthcare where providers could sell me healthcare services directly, those services would still be way too expensive. Health insurance costs so much because health services cost even more!
In general, repairing your body costs more than repairing your home or automobile. So, health insurance should cost more than home or auto insurance.
However, the heart of the matter lies in the prevalence of insurance reimbursements paying for healthcare services.
Remember that insurance is based on risk. When health insurance companies take on more risk, they charge more. This risk is calculated based on factors including your age, where you live, your tobacco use, and the type of coverage. In particular, the type of coverage will dictate how you and your insurance share healthcare costs. When the insurance company bears the brunt of these costs when you fall ill, they assume more financial risk and therefore charge you more.
When health insurance companies are paying out for basically every health service, not just for catastrophic care, there is more inherent financial risk.
If home insurance covered every aspect of repairing your home, it would be extremely expensive. If auto insurance covered every aspect of repairing your car, it would be extremely expensive. If health insurance covered every aspect of repairing your body… wouldn’t it be extremely expensive too?
Health insurance is not a bad thing. It’s just as important as home and auto insurance. However, when insurance becomes so overbearing that it must be used to afford non-catastrophic repairs or treatment, then there exists a serious problem that must be addressed.
Home insurance is for when your house floods, not when your faucet leaks.
Auto insurance is for when your car is totaled, not when your tire bursts.
Health insurance is for when you have a chronic illness, not when you tear a muscle.
At Directly, we are currently creating a free market for healthcare to end the unhealthy relationship between health insurance and healthcare.