Many Americans are growing increasingly worried about the rising costs of health insurance, with experts predicting that premiums could rise again next year. Some believe that, in certain situations, it might actually be more affordable to pay for medical expenses directly rather than opting for health insurance.
Anna Dore Sinaiko, a health economics and policy professor at Harvard, noted that the overall costs tied to insurance could potentially make healthcare expenses higher than if a person were uninsured, especially for healthy individuals who infrequently require medical care.
However, she also mentioned that for those relying on more than just basic healthcare, not having insurance is unlikely to be cheaper than having coverage.
Why Is It Important
With enhanced tax credits from the Affordable Care Act set to expire at the end of the year, ACA-compliant plans are expected to see an average increase of around 20%. Concurrently, employer health benefit plans are predicted to rise more than 6% next year.
There are multiple reasons behind the increasing costs of health insurance, such as inflation, rising labor expenses post-COVID-19 pandemic, and greater demand for GLP-1 medications like Ozempic and Wegovy meant for weight loss and diabetes management.
A recent survey conducted by The Associated Press and NORC at the University of Chicago revealed that 57% of Americans feel “very” or “extremely” worried about the escalating costs of healthcare.
What You Need to Know
While some Americans may face lower medical expenses by forgoing health insurance, this approach carries the risk of hefty bills from unexpected injuries or health crises.
Gerald Anderson, a health policy and management professor at Johns Hopkins University, remarked that for those lacking employer or government insurance—which covers most medical expenses—going without insurance could be cheaper, provided they don’t face major health issues like cancer or heart attacks.
That said, he pointed out that, from a health economics standpoint, 20% of the population typically accounts for 80% of healthcare expenses. The issue is, you never really know who will fall into that 20% category, making it generally safer to have insurance.
In some instances, healthcare providers may offer lower rates for cash payments instead of going through insurance. Christopher Whaley, another professor from Brown University, mentioned that this can provide savings for patients while also reducing the administrative burden on healthcare providers.
For pricier treatments, insurance companies often negotiate discounts based on the provider’s standard rates. Therefore, for someone hospitalized, the costs without insurance can be significantly higher than those under an insurance plan.
Plans aimed at those who don’t need regular health insurance, but still wish to protect themselves from high emergency costs—often referred to as catastrophic coverage—are becoming increasingly appealing, especially to younger individuals without existing health issues.
Thanks to the expanding role of pharmacies, paying cash for generic medications may sometimes be more economical. Dr. Atieb Mehrotra, also affiliated with Brown University, noted that certain pharmacies might offer a 30-day supply of specific generics for as low as $4.
This, he explained, is partially due to the fact that insurance claims incur substantial administrative costs, which can sometimes exceed the actual reimbursement amount. Yet, such cases are not the norm; typically, out-of-pocket payments tend to be higher than the insured costs.
According to the Peterson-KFF Health System Tracker, 95% of U.S. adults under 65 represent only 47% of healthcare spending in that age group. This means quite a number of people might be “overpaying” for coverage and could save funds by not enrolling in insurance, noted Ge Bai, a professor at Johns Hopkins Bloomberg School of Public Health.
She added that if more healthy individuals opt out of insurance, those remaining insured might face even faster premium increases.
This situation could lead to an “insurance death spiral”, where only the most ill individuals seek insurance coverage.
People’s Opinions
Christopher Whaley mentioned that while policymakers have aimed at improving access to health insurance, they have largely overlooked what drives the expenses of healthcare in the U.S. If the root causes—especially rising hospital prices—aren’t addressed, premiums will keep climbing, whether patients pay directly or they’re subsidized by taxpayers.
He observed that the current sharp uptick in premiums faced by families may lead some to drop their coverage altogether. If those with insurance deem the rising costs “worth it,” the insurance pool may deteriorate further, escalating costs even more for next year.
Dr. Atiev Mehrotra remarked that some people reacting to high premiums might drop their coverage, hoping they can manage their medical bills more cheaply. For healthier individuals, this might indeed hold true, as they often can pay out-of-pocket without incurring significant expenses. But, he cautioned, this strategy can undermine insurance’s primary purpose: to shield individuals from catastrophic costs during emergencies.
Ge Bai criticized the Obamacare plan for turning into, as she described, a subpar option with prohibitively high premiums. For instance, she cited that a family of three might face an exorbitant annual premium of around $22,000 alongside a deductible of $21,000. This, she compared to paying a mortgage for a non-existent property. Many could find substantial savings by exploring alternatives.
She concluded that as healthcare insurance costs skyrocket, more Americans are likely to avoid costly premiums in favor of different options, like direct care or short-term plans. This shift could instigate a much-needed transformation in American healthcare into something more patient-centered and cost-effective.
Anna Dore Sinaiko reiterated that growing premiums might push many, especially healthier individuals who don’t foresee needing extensive medical care, to reassess their insurance plans. Some may opt for less comprehensive policies or drop coverage entirely, concluding that higher costs aren’t justified.
Unfortunately, this situation could create perilous conditions—uninsured individuals lose their financial safety net during health crises, which not only covers unexpected bills but also instills confidence that they are protected against severe unforeseen costs. Plus, the uninsured often enjoy limited access to healthcare, which can affect their long-term health outcomes.
The Full Interview is Below
Interview with Anna Dore Sinaiko, professor of health economics and policy at Harvard University.
Q1: Given the expected increase in health care costs next year, is it possible that it will be cheaper for Americans to not pay for health care through insurance? If so, how could this happen? Why does paying for health insurance cost more than the bill itself?
“Americans with health insurance typically pay a monthly premium, followed by a deductible or co-payment for services. The total cost of insured care includes both premiums and co-pays, not just the immediate expenses incurred during a visit.
“This overall expense can occasionally lead to higher healthcare costs than remaining uninsured, particularly for those in good health or who seldom need care. For example, someone with minimal healthcare needs might find it cheaper to pay directly for their occasional medical visits. Although treatment costs for the uninsured are usually higher than those for insured patients, some providers may offer cash discounts or reimbursements for uninsured patients. Hence, uninsured individuals may end up paying the same prices that insurers pay.
“For those who need more than just basic care, it’s quite unlikely that not having insurance will prove to be cheaper.”
Q2: Given this, what do you expect more Americans to do about their health insurance next year, and what impact might that have?
“As health insurance premiums rise, it’s likely that more Americans, particularly healthier individuals not anticipating long-term care, will switch their health plans—opting for less comprehensive coverage or even forgoing it altogether. Some could find that the heightened costs aren’t justifiable, while others might simply be unable to meet the increased premiums.
“For those opting out, the situation can become increasingly precarious as being uninsured poses significant risks. Without insurance, they lose their financial safety net during sudden illnesses or accidents. While health insurance helps manage unexpected costs, it also offers crucial peace of mind against significant, rare expenses. Moreover, uninsured individuals tend to avoid seeking necessary medical care, even if it might significantly affect their future health.
“Another critical finding indicates that those who maintain their insurance are likely to see their premiums intensify. This stems from the expectation that the remaining insured population may face increased health challenges or utilize more medical resources, prompting insurers to raise premiums to cover those added costs.”
