The Double-Edged Sword of Healthcare Costs

As political gridlock drags on, a double-edged sword is swinging at a target. That target is the cost for the average American to get healthcare. The first edge is the 18% average increase in premiums that we face. The second is the potential loss of subsidies for many on the ACA exchanges.

Since 2010, the general cost of living has averaged under 3% a year. At that pace, a meal that cost $10 in 2010 would cost $15.60 in 2025. Health insurance premiums, by contrast, have climbed around 9% a year. The average policy that cost $2,400 in 2010 would now cost about $8,720 in 2025 before subsidies. The subsidies do not erase the increase. They conceal it.

Here is the uncomfortable truth. Democrats may have championed the ACA, but it was engineered to be acceptable to big business. The big health insurance companies like BCBS, UHC, Humana, and Aetna pushed for it along with big pharma and the hospital lobby. It expanded the customer base through the original individual mandate, routed public money through private insurers via premium tax credits, and buffered carriers with risk-adjustment, reinsurance, and risk-corridor rules. As a result, the big carriers gained millions of paying customers, while hospitals and pharma tapped new revenue streams.

The 80/20 medical loss ratio was touted as a way to control the profits of insurance companies. Insurers were limited to keeping 20% of every premium dollar for administration, reserves, and profit, while the rest was to be spent on claims and wellness programs. Sounds like a great idea.

Unfortunately, it has not worked. In 2010, that 20% was $480 on a $2,400 premium. In 2025, it is $1,744 on an $8,720 premium. It is still the same percentage, but it is on far bigger dollars.

No wonder there is a push to preserve subsidies. Big business wants to mute public backlash while preserving the structure that allows big insurers to profit. Add to that the vertical integration occurring where pharmacies are owned by insurance companies, and hospital and doctor groups becoming affiliated with companies to allow claims dollars to become profit outside the 20%, and it is easy to see who is losing.

This is simply corporate welfare dressed as consumer help. While we may be outraged at what has happened, there is a solution.

Employers fund most of the health benefit program. It is time for them to fire the big insurance companies and buy the care that is needed differently. They need to use direct primary care, a transparent pharmacy system, and reference-based or cash payment systems. By using steerage networks, smart reinsurance, and incentives that reward health, they can control costs.

That is the core of Total Benefit Control, my book on how to get better care for fewer dollars by removing waste and buying like a CFO.

Glen Riensche, CLU, RHU, REBC 402-202-2550 [email protected]