Why Is U.S. Health Insurance So Expensive?

If you have health insurance, you know it's very expensive.

Costs for it continue to rise.

While the Affordable Care Act (ACA/Obamacare) expanded coverage, it didn't fundamentally solve the affordability problem. The reason for this is that it didn't address the underlying causes of rising costs.

Below are some of the issues Obamacare failed to address, or — in some cases created.

One of the major drivers of health insurance costs is the complex "paperwork," or administrative burden of our system.

This is partially due to our fragmented network of private insurers, government programs, and employer sponsored plans.

Each of these has its own systems of billing, coding, and compliance processes.

According to the Peter G. Peterson Foundation, the U.S. spends $1,000 per person on administrative costs alone (approximately five times more than other wealthy countries) and these costs are passed on to consumers in health insurance premiums. 

Obamacare also introduced guaranteed issue requirements, meaning insurers must accept all applicants regardless of pre-existing conditions.

While we all want affordable care for all, this provision increased costs across the board because insurers must cover higher risk individuals without adjusting premiums to reflect their health status.

If you have ever had life, home, or auto insurance, you're aware this violates a principle under which most insurance operates — those who are higher risk tend to pay higher premiums.

Similarly, community rating rules limit how much insurers can vary premiums based on age or health.

These provisions redistribute costs, often raising premiums for younger, healthier enrollees.

We must find ways to cover those at higher risk without negatively impacting the market for everyone else.

Another Obamacare provision is a requirement that most health plans cover a broad set of "essential" health benefits.

These include maternity care, mental health services, and preventive care.

While these benefits improve access, they also raise the baseline price of insurance.

Pre-Obamacare plans often excluded these as base services, making those plans cheaper but less comprehensive.

By mandating coverage, Obamacare increased premiums, even for individuals who may not wish to use these benefits.

Insurance costs are directly tied to the price of healthcare services, and these services are very expensive in the United States.

We spend more per capita on healthcare than any other nation. In 2024, that was roughly $14,885 per person.

When you compare this to the average of $7,371 per person spent by other wealthy countries, and consider that healthcare outcomes are no better here, it drives home the point that something is terribly wrong with our system.

Unlike Social Security, Medicare is partly funded by the general fund, which adds to the U.S. debt. In 2023, Medicare spending was $839 billion, while all federal healthcare spending in 2024 accounted for $1.9 trillion — about 27% of all expenditures.

It doesn't take a rocket scientist to understand that the government alone could save roughly $1 trillion per year if we could bring healthcare spending down to the average of other wealthy nations.  

One major problem in our current system is the lack of price transparency.

No one would buy a car, home, groceries, or most other products without knowing the price of what we are buying up front.

Yet, that's exactly what we do with healthcare.

Rarely do we know the costs of healthcare prior to service.

This is both insane and the result of a lack of real political leadership that solves problems.

True market competition is a key factor in controlling prices for any product or service, but our lack of price transparency for healthcare services is an impediment to such competition.

Our leaders must standardize the complex coding, billing, and compliance processes referenced earlier and provide consumers with information which allows them to shop for healthcare the way they shop for everything else. 

Prescription drug costs are also out of control.

For years, the U.S. has paid high prices to subsidize other wealthy countries having drug price controls in place. Although drug companies should profit from life-saving drugs, the costs of this should be shared by the world, not shouldered by the United States.

Fortunately, President Trump seems to understand this and is working to address drug pricing through tariff negotiations.

As a society, we can also reduce healthcare costs by continuing to promote a healthy lifestyle. Common sense dictates that prevention of a health issue is far more cost effective than treating one. If the MAHA movement is successful, we should be a healthier society with a reduced need for many health services. 

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Joe from Texas is a family man with children, grandchildren, and great grandchildren. He's experienced tremendous success and lived the American Dream. His beliefs are both straightforward and deeply held. He believes in God, his family, and the United States of America. Read Joe Penland, Sr.'s Reports — More Here.