Why Is Health Insurance So Expensive?
One of the most commonly heard complaints about health insurance plans is that they are too expensive and are now beyond the reach of many people. But why do we have to pay so much for simple medical cover?
The answer which you will most often receive is that health insurance plans merely reflect the very high and rising cost of modern medicine and, while this is true, it is also much too simple an answer. To understand the real truth behind today’s high cost of health insurance you need to start by understanding the basic principles of health insurance itself.
Insurance of any description is not designed to meet normal day-to-day expenses but to meet unexpected expenditure which you would not normally expect to meet and which you would almost certainly not be able to meet without insurance. In other words, it is designed to meet the cost of something which you hope will never happen and so you should also hope to pay for insurance year after year without ever getting anything in return.
Just stop and think for a moment about car insurance. Many people have driven happily for years without ever encountering an accident and have paid thousands of dollars for motor insurance. Others however have been unfortunate enough to be involved in serious road traffic accidents which have resulted in their insurers paying out sums of money which they would never have been able to meet personally without going into bankruptcy. It is however the fact that millions of motorists pay their premiums each year without making a claim against their motor insurance plan which allows the insurer to build up a pool of money from which to pay those claims which do arise.
That’s all well and good, but what has it got to do with the high cost of health insurance?
The fundamental difference between car insurance and health insurance is that the law requires you to buy the former but does not require you to buy the latter. In other words, when it comes to meeting motor claims the insurance companies have a large pool of money to draw upon because the law requires that anyone who takes a car out onto the highway must have insurance. However, the same is not true in the case of meeting health insurance claims because a much smaller number of people are paying into the pool since payment is purely voluntary.
But the lack of a legal requirement to purchase health insurance is only one reason for its high cost. Unlike many other forms of insurance, history shows us that many people only tend to buy health insurance when they fear that they might need it and are anticipating large and growing medical bills. As a result the number of claims in relation to the number of plan holders is high and you have a much smaller number of people paying into a pool from which a much larger number of people are claiming.
The result today is that health insurance is not only expensive but also requires considerable screening, restricting or excluding cover for certain illnesses, simply to keep costs down to their already very high level.
The problem of the high cost of health insurance has been of concern not only to individuals but also to the insurers and government for some time now. However, finding a solution to the problem is not easy and will require some radical and fundamental changes to the present system which we are unlikely to see for some years. In the meantime, the insurers are designing an ever widening range of plans to try to tackle the problem and it is still possible to find affordable health insurance if you are prepared to do your homework and shop around.
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