Veriton Insurance Group

Modern Insurance Myths — Part 5
“Insurance companies are the reason healthcare is so expensive.”

I hear this one all the time; and for obvious reasons. You see your premiums go up every year, your deductible reset, and a claim get denied… so it’s easy to point the finger at the insurance company and say, “they’re the problem.”
But that’s not actually how the system works.

Insurance doesn’t create the cost of healthcare. It sits in the middle trying to manage it.

So what’s actually driving the cost?

1. Administrative complexity
We’ve built a system with multiple carriers, plans, networks, and rules.
Every single claim has to be coded, processed, reviewed, and sometimes appealed. That means entire departments just to handle billing.
A big chunk of what you pay for healthcare… isn’t care. It’s the cost of processing the payment for the care.

2. Regulation & Compliance
Healthcare is one of the most heavily regulated industries in the country.
HIPAA, COBRA, ERISA, Medicare rules, state mandates, documentation requirements…

All of that requires:
Compliance teams
Legal oversight
More admin staff

It doesn’t just add cost—it slows everything down and makes the system less efficient.

3. Hospital and Provider Pricing
Hospitals set the prices. And in a lot of markets, there’s not much competition anymore. Large health systems have bought up smaller practices and control pricing. That's why an MRI can cost $400 at an imaging center and $3,000+ at a hospital. Same scan. Very different bill.

4. Drug and device costs
The U.S. pays more for prescriptions than almost anywhere else.
Some specialty medications are $50K, $100K, even $500K+ per year.
That cost gets built into the system.

5. Labor (yes, this matters too)
Healthcare runs on people, lots of people. And almost every role requires some level of training, certification, or specialization. Doctors, nurses, PAs, NPs, Nurses, Lab techs, billing departments, IT staff, compliance teams, etc. And most of these roles come with some form of training/educational debt.

Doctors often graduate with ~$200K–$300K in debt
PAs ~$100K
NPs ~$50K+
Admin Managers ~$20k+
IT/EMR ~$20k+
Annual training costs alone average ~$3k - $7k per employee, up to $10m - $25m per year across an entire hospital system!

That doesn’t necessarily mean these people are overpaid; it means there’s a floor to what it costs just to staff the system.

Here’s the reality:
There isn’t one villain maliciously gouging you. It’s admin complexity, regulation, pricing power, drug costs, and labor… all stacking on top of each other.
Insurance is part of the system—but it’s not the thing creating the cost.
It’s just the piece everyone sees.

Modern Insurance Myths – Part 1
Insurance is a scam…

I hear this at least once a week from random people and even friends and family. And I get it… it feels like it is. You feel like you pay a bunch of money into something and don’t get anything out of it.
But here’s the truth — most people calling it a scam don’t actually understand the purpose of insurance.
They think insurance is supposed to make everything cheap. When I go to the doctor it should only cost me $20, never mind the fact that it cost that doctor $500k+ to become a doctor so he can only charge you $20 for that visit. That reality never enters that person’s mind (that’s another topic for another time).
Guess what – insurance wasn’t designed to do that in the first place. The original purpose of insurance was to protect you from catastrophic losses. It’s designed to be there when you wake up with appendicitis at midnight and now have a $35,000 bill from the hospital for emergency surgery.
Insurance is there for the big stuff, ie cancer, heart attacks, major illnesses.
The ‘this would financially wreck me’ stuff.
It’s not a discount card for every little thing and never was supposed to be. You can thank the introduction of HMO’s for that.
So, when people say, ‘this is a scam’…what they really mean is: ‘I thought I don’t have to pay for anything because I pay my premium every month’. That premium isn’t buying you a $20 visit for a sinus infection, its buying you protection against 5, 6, and even 7 figure losses.
That misunderstanding is the reason so many smart people can be so confident in there “scam” declaration, while being completely wrong in reality.