Why Health Insurance Is So Expensive

Author: Samantha Bridge, RN, MSN, MBA-HCM, IQCER
Date: April 11, 2025

Health insurance is supposed to make healthcare more affordable—but for many Americans, it feels like the opposite. Rising premiums, deductibles, copays, and uncovered services have left families wondering: Why is health insurance so expensive in the U.S.?

The short answer? It’s complicated. But there are clear, fixable reasons why costs are so high. In this article, we’ll break down the key drivers behind the rising cost of health insurance and show you where your money is going.

What Are We Actually Paying for Health Insurance?

In 2023, the average annual premium for employer-sponsored health insurance was $8,435 for single coverage and $23,968 for family coverage. Even with employer contributions, most workers are paying more than ever—plus additional out-of-pocket costs before insurance kicks in.

1. Insurance Pays for Quantity, Not Quality

The fee-for-service model rewards providers for doing more, not necessarily for achieving better results. That means more tests, more visits, and more costs—with no guarantee of better outcomes.

2. We’re Paying More for the Same Services

Healthcare prices in the U.S. are higher than in other countries. For example, a hip replacement costs about $28,000 here vs. $16,000 in New Zealand. There’s no consistent pricing system, and most patients don’t know what they owe until the bill arrives.

3. Prescription Drugs Cost More Here Than Anywhere Else

Prescription drugs cost 2–4 times more in the U.S. than in other countries. Here are the top-selling brand-name medications and their average monthly prices:

• Ozempic® / Wegovy® – $969/month
• Humira® – $6,922/month
• Eliquis® – $529/month
• Trulicity® – $886/month
• Jardiance® – $570/month

Pharma companies cite high R&D costs, but the reality is that much of the markup goes toward intermediaries—pharmacy benefit managers, wholesalers, and marketing expenses.

4. Administrative Costs Are Wildly High

Administrative overhead accounts for up to 25% of healthcare spending in the U.S. The paperwork, billing codes, and insurance requirements are costly—and that burden gets passed on to you.

5. Most People Don’t Choose Their Own Plan

Over 153 million Americans get insurance through an employer. But workers often don’t choose the plan—HR departments do, based on budget and convenience.

6. More Americans Are Managing Chronic Illnesses

Chronic conditions like diabetes, heart disease, and high blood pressure affect 60% of adults and drive long-term healthcare costs higher for everyone.

7. The U.S. Has an Aging Population

As Baby Boomers retire, Medicare enrollment and spending continue to rise. By 2053, Medicare will account for 5.5% of GDP. Although Americans contribute through payroll taxes, the government spends more per person than it collects.

8. Health Insurance Companies Are Still Businesses

The top five insurance companies in the U.S. control most of the market and earn billions in profit. Their model depends on collecting more in premiums than they pay out in claims.

What Can You Do If Your Insurance Doesn’t Cover What You Need?

Understanding costs is important—but what happens when you get denied coverage for something your doctor recommends?

That’s where Appeal Tech Allies comes in. We created EZ Med Appeal to help you fight back when your insurance says “no.” Our smart platform helps you write a strong appeal letter, fast.

One denial isn’t the end—it’s where we begin.