The Healthcare Insurance Trap: How Patients and Hospitals Are Both Losing Out

Introduction: You've probably noticed that even with insurance, getting healthcare is still expensive and confusing. Patients are paying more out of pocket. While patients are struggling, hospitals are as well. Yup, you heard that right, even hospitals. How can it be that everyone seems to be losing, except for insurance companies? The answer lies in the way our system is set up, where profit takes precedence over patient care.

The Insurance Game: Profit Over Patients Health insurance companies have a massive influence over how much we pay for healthcare. They set reimbursement rates for hospitals and decide what treatments they will cover. Insurance usually denies the necessary recommended treatment that doctors give, simply because it cost to much money. Deductibles, co-pays, and coverage loopholes often leaves patients footing surprise medical bills, even if they've done everything “right” by having insurance.

For example, insurers use something called prior authorization to decide whether they'll cover a treatment or medication your doctor prescribes to you. This process delays care, and studies show that these denials are often costly. Even when a treatment is covered, insurers might only pay a fraction of the cost, leaving the hospital or patient to cover the rest.

Why Are Hospitals Struggling Too? While big hospitals and health systems can sometimes negotiate better rates, small and rural hospitals are out of luck. These hospitals depend heavily on insurance reimbursements to stay open. When insurers underpay or delay payments, these hospitals are left scrambling to cover basic costs like staffing, supplies, and equipment which are just basic necessities to keep them running. Some hospitals have had to close their doors because they simply can't afford to operate under these conditions.

It's a vicious cycle: hospitals that are underpaid have to charge more for other services to make up the difference, which in turn leads to higher costs for everyone, feeding into the cycle of rising healthcare expenses. People often believe that hospitals are the ones to blame and have greed. But the sad truth is, insurance corporations are the ones to blame. They maximize profit over care.

The Hidden Costs of “In-Network” and “Out-of-Network” Care: One of the biggest surprises patients face is finding out that the doctor or service they thought was covered is actually “out-of-network.” Even if you go to a hospital that's in your insurance network, the specialists or labs that work with the hospital might not be. This loophole is a goldmine for insurers, who avoid paying the higher costs while patients are left with unexpected bills. While some might blame hospitals, its important to also remember that Hospitals also struggle to find employees and have a great need for them.

How Insurers Leverage Power Over Providers: Insurance companies hold significant power in negotiations. They can drive down reimbursement rates for hospitals and physicians, but still charge high premiums to patients. Hospitals that refuse to accept lower rates might be dropped from an insurer's network altogether, leading to fewer patients and financial instability for everyone.

Who Really Profits? Despite the increasing costs of healthcare for patients and the financial struggles of many hospitals, insurance companies are reporting record profits. By controlling both what care gets approved and how much they reimburse for that care, they can keep costs low for themselves while pushing the burden onto hospitals and patients. According to data, some of the largest insurers have profit margins exceeding 10%, while patients struggle with rising premiums and deductibles. This may not seem like a lot, but the cost adds up.

The Impact on Healthcare Quality: As hospitals continue to struggle financially, they're forced to cut costs. This often leads to staff shortages, overworked healthcare providers, and reduced access to quality care. For patients, this means longer wait times, fewer available services, and in some cases, traveling long distances to get specialized care.

The healthcare insurance system is failing both patients and providers. While insurers continue to profit, patients are stuck with higher costs and less access to care, and hospitalsᅳespecially smaller onesᅳare struggling to survive. Fixing this broken system requires reforms that prioritize patient care over profits and ensure that hospitals can operate sustainably. Until then, both patients and hospitals will continue to bear the brunt of a system designed more for profit than for people. So, remember, the next time you go to the hospital, take it easy on the doctors because they are trying their best.

Author: Ethan Caldwell

References: Brill, S. (2013). Bitter Pill: Why Medical Bills Are Killing Us. Time Magazine.

Anderson, G. F., Reinhardt, U. E., Hussey, P. S., & Petrosyan, V. (2003). It’s the prices, stupid: why the United States is so different from other countries. Health Affairs, 22(3), 89-105.

“The High Cost of Low Reimbursement: How Insurance Undermines Patient Care.” Kaiser Family Foundation, 2021.