Next year’s hike in health insurance consumer costs is projected to be 9.5 percent. That is on top of this year’s 9 percent increase and 6 percent in 2025. From 2000 to today, when inflation rates were typically 3 percent or less (except during COVID), the growth rate for health insurance costs has been 6-to-9 percent. Because of compounding, this means in the last 25 years, consumer insurance costs have more than quadrupled.
This year, the average U.S. family of four will have a gross take-home pay of $83,730 according to the Bureau of Labor Statistics. Healthcare costs for this same family will amount to $37,824, the bulk of it the price of ever-increasing insurance premiums.
As politically radioactive as the answer is, the best way to make health insurance affordable requires removing third-party payers from the healthcare financing system,
The pattern is clear. The cost of health insurance keeps rising without regard to external factors and without providing any value to the consumer. When you pay more for something, you expect to get more. Why is this not true of health insurance? And will these mandatory, disproportionate, and progressively more unaffordable consumer costs continue to rise indefinitely? Apparently, the answer is yes.
In 2010, insurance costs were already unaffordable. After signing Obamacare into law, President Obama admitted that his namesake healthcare act would reform health insurance, rather than making health care affordable, despite its name, the Affordable Care Act (ACA). He further assured the public that Americans would save $2,500 on health insurance costs.
The savings never materialized. Insurance costs continued their apparently unstoppable climb. The economic pain was suppressed by the ACA subsidies, i.e., by expending more taxpayer dollars into insurance coffers.
After 2010, especially with the addition of $1.76 trillion in ACA administrative costs, consumer insurance costs continued their ascent into the stratosphere. More unaffordable may be poor grammar, but it reflects the American experience.
With the COVID pandemic starting in 2021 and Fauci’s anti-science mandatory lockdowns, millions lost their jobs. Without employment, they also lost their employer-sponsored health insurance (ESHI). They then qualified for extended ACA subsidies or Medicaid, and so, the public was again protected from — did not feel the economic pain of — constant increases in insurance rates.
Fast forward four years to the government shut down of 2025. The bone of contention ostensibly was the continuation of subsidies that made insurance affordable or at least less unaffordable. A sunset clause had been built into subsidy extensions, reasoning that when COVID was over, subsidies would be unnecessary. However, that would expose the public to the true further enhanced cost of insurance. Under cover of the economic painkiller of subsidies, insurance companies had been steadily increasing consumer costs.
For the last 25 years at least, health insurance costs have consistently outpaced inflation by a wide margin. The obvious but superficial explanation is the lack of downward pressure on prices to counter the profit motive that exists in all commerce. The deeper reason is market dynamics.
In markets other than healthcare, the buyer or consumer pays directly for goods and services from his own money. Therefore, buyer has a strong incentive to minimize spending and to shop for the lowest price. In these markets, sellers compete for consumer dollars. These two market forces create the downward pressure that keeps prices low.
In the healthcare market, the consumer (or first party) does not pay the seller (second party) directly. Furthermore, consumers are a captive market, as 84 million American workers get their insurance through their employer, not purchasing individually. In addition, the seller does not set the price or payment. Healthcare is unique among markets having a third-party who is neither buyer nor seller yet who pays by spending OPM (other people’s — taxpayers — money), and who determines the prices (payments) rather than paying sellers’ charges.
As long as a third party rather than the consumer pays, market forces that normally keep prices low — buyers’ need to economize and inter-seller competition — are absent. That is why prices rise and will continue to do so. They obey Newton’s First Law of Motion: “a body in motion tends to stay in motion … unless acted upon by an outside force.” At present, there is no outside force to stay the upward motion of prices.
There are two potential outside forces: central economic control or free market forces. Central control, also called a command economy, means government price fixing. History shows that price fixing, a hallmark of socialism, causes low quality, slow service, shortages, suppression of innovation, and economic depression. Recent demonstrations of the effects of central economic control include the U.S.S.R., Venezuela, Cuba, and North Korea.
(In light of the rise of the Democratic Socialists of America, remember that U.S.S.R. stands for Union of Soviet Socialist Republics.)
To make health insurance affordable while avoiding the fate of the U.S.S.R., infuse the health insurance industry with the free market forces as described above. As long as a third party rather than the consumer pays for what is consumed, prices will continue upward inexorably.
As politically radioactive as the answer is, the best way to make health insurance affordable requires removing third-party payers from the healthcare financing system and returning control of spending to consumers.
After all, it is YOUR MONEY.
READ MORE from Deane Waldman:
Why Healthcare Price Transparency Will Fail
The Wrong People Hold Health Care Purse Strings
Why Your Phone Got Cheaper — and Your Health Insurance Didn’t
Deane Waldman, M.D., MBA, is Professor Emeritus of Pediatrics, Pathology, and Decision Science; former Director of the Center for Healthcare Policy at Texas Public Policy Foundation; founding Director of the New Mexico Health Insurance Exchange; and author of award-winning, “Become an Empowered Patient.” Follow him on X.com@DrDeaneW or visit website www.empowerpatients.info.
