Why Has Health Insurance Become More Expensive?
Health insurance has become more expensive for many in recent years, which can be attributed to a variety of factors. This article explores these factors and discusses how insurance pricing is influenced by income and other practical considerations.
The Role of Income in Insurance Pricing
One key aspect of health insurance pricing is its relationship with income. When insurance is based on income rather than risk, those with higher incomes end up paying more. This reflects the idea that those with higher disposable incomes are considered less likely to file insurance claims, thus their cost of insurance is higher as compared to those with lower incomes.
Examples of Cheaper Insurance Options
Let's take a look at some examples where insurance was cheaper:
Term Life Insurance
Term life insurance was notably less expensive until income levels increased. This type of insurance generally has lower premiums, especially when income is lower, since it is designed to provide financial protection for a specified period.
Liability Insurance for an Old Car
For a 20-year-old car with no market value, liability insurance is inexpensive. Since the vehicle has minimal value and no replacement cost, the need to cover it comprehensively is not warranted, leading to lower insurance premiums.
Homeowner Insurance
Homeowner insurance, which protects valuable and inflation-resistant assets, is an essential aspect of comprehensive insurance coverage. While more expensive, it is crucial for protecting one's significant financial investments.
Disability Insurance and Long-Term Care Insurance
At one point, long-term disability insurance through social security was worthwhile, but with the ability to manage without full-time work, it is no longer necessary. Similarly, long-term care insurance will be considered once retirement funds are accessible, although it is not a priority now.
Healthcare and the Impact of Capitalism
In the United States, healthcare is a for-profit industry, which can exacerbate the financial strain on individuals and families. Even with the introduction of the Affordable Care Act (ACA) under Obamacare, there are still significant cost issues.
Obamacare and Its Impact
When Obamacare was introduced, the stock prices of health insurers increased, indicating a positive outlook for the industry. This was because the law was influenced by big business and pharmaceutical companies, which aimed to benefit their own interests. For individuals, this meant that some insurance options, such as catastrophic care insurance, have become less attractive.
Personal Experience: Moving Away from Catastrophic Care Insurance
I used to have catastrophic care insurance, where I paid for all care until reaching a $10,000 limit and then insurance covered the rest. The monthly premium was around $175. However, under Obamacare, the changes to health insurance plans have made this option less optimal for me.
Now, under Obamacare, the scenario is different. The focus has shifted to more comprehensive insurance coverage, which increases the overall cost. For someone who does not need frequent medical care and prioritizes other financial goals, such as investing or saving, the traditional catastrophic plan may no longer be the best choice.
The Need for Universal, Not-for-Profit Healthcare
Given the current situation, it is argued that a universal, not-for-profit healthcare system would significantly improve the quality of life and reduce financial stress for a large portion of the population. This shift would lead to a more equitable distribution of resources and better health outcomes for everyone.
With improved healthcare accessibility and affordability, individuals can feel more secure and less fearful about their future, ultimately enhancing overall freedom and well-being.
Key Points:
The relationship between income and insurance pricing. The benefits and drawbacks of different insurance options. The impact of healthcare laws on insurance pricing and accessibility.