Premiums without Benefits: Waste and Inefficiency in the Commercial Health Insurance Industry

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Abstract
The U.S. system of health insurance is wasteful and inefficient. For every dollar the commercial health insurance industry paid in claims in 1988, the industry spent 33.5 cents for administration, marketing, and other overhead expenses. Thus, not including profits, the commercial insurance industry spent 14 times as much on administration, overhead, and marketing per dollar of claims paid as did the Medicare system, and 11 times as much per dollar of claims paid as the Canadian national health system. Had an efficient public program such as Medicare or the Canadian system provided the same amount of benefits, consumers and businesses served by commercial insurers would have saved $13 billion. The sources of waste include excessive marketing costs and administrative costs bloated by discriminatory underwriting practices that segregate the profitable groups and individuals—people who are healthy, young, and in “safe” professions—from everyone else.

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