Why Does Health Insurance Cost So Much?

  1. 1575 POINTS
    Christopher Lawrence
    Insurance Broker | Financial Consultant, Lawrence Insurance Consulting, Southern New Jersey
    Because insurance primarily deals with "pure risk", the chance of loss but not the chance for gain. The most effective way for a insurer to effectively manage their own costs and to pay out on claims while still being profitable is through "risk pooling" which is the practice of grouping a large number of homogeneous and independent risks. By risk pooling those who subject the insurer to excessive claims should be off set by the policy holders who under use their policies. However the current market is not balanced .. one of the goals of PPACA, therefore the majority of individuals who are seeking health coverage are the ones who are going to be most likely to incur expensive claims. There are several other factors such as hospitals, when they extend charity care to poverty stricken individuals who need treatment they are forced to reconcile their budgets by charging more to the individuals who have the means to pay... another area that PPACA aims to address. 
    Answered on April 25, 2013
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  2. 12689 POINTS
    Ted Ratliff
    Owner, SFS Associates,
    The simple answer to this is the high cost of health care and prescription drugs.  Insurance companies are forced to maintain a very small profit margin by law, and any rate increases must be approved by the Department of Insurance.  The PPACA laws are going to make the situation worse for many, unfortunately. 
     
    Answered on April 25, 2013
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