Most of us have by now heard many indictments of private health insurance, from its inefficiencies and unaffordable costs to its profiteering, cherry picking, and avoiding coverage of those who most need insurance. What’s new and may be surprising to many people is this: despite its size and political power, it is a dying industry.

The industry’s track record speaks for itself. It is an imploding industry on a death march. The costs of insurance premiums alone have become unaffordable for tens of millions of Americans, and are increasing several times faster than costs-of-living and family incomes. As the attached graphic shows, premiums will consume almost one-third of average household income by 2010, and all of it by 2025! Moreover, insurance covers less and less of total health care costs.

Access to affordable health care has become a major concern affecting all middle class Americans, with no relief on the horizon. Private insurers go to great lengths to avoid coverage of sick individuals and even high-risk groups. As their employer-based market shrinks, they desperately seek out new lucrative markets with near-worthless limited-benefit policies. Their overall private markets are shrinking, and they now turn to generously subsidized public programs, especially Medicare and Medicaid, for revenue growth.

The health insurance industry is unsustainable, as some of its insiders fear. Bernard Tresnowski, President of Blue Cross/ Blue Shield, issued this warning in 1994: “The good old days, when nobody really paid a lot of attention are gone. We’re now front and center in the public policy sphere… What our future holds depends in many ways on our ability to continue to control the rate of increase of health care costs… It will be a real test over the next five to eight years as to whether the private sector indeed can produce the kind of results that would make health care more affordable.”

Even Wall Street analysts are seeing dark clouds on the horizon for the health insurance industry. Commenting on precipitous drops in share value of Wellpoint, the nation’s largest insurer, Sheryl Skolnick, health care analyst and senior vice president at CRT Capital Group, observed in April, 2008 “that it took Wellpoint imploding for us to figure out that current prices of health plans do not account for growth in medical costs,” and that in order to reverse their downturn insurers must “create affordable health insurance plans that consumers really want to buy instead of affordable-but-barebones plans that do not offer consumers a compelling value.”

Annual Health Insurance Premiums and Household Income, 1996-2025

The industry’s 60-year report card is in, and it has failed the public interest. It is now time to require an efficient, equitable and sustainable financing system that can enable universal coverage for all Americans of necessary health care by spreading risk across our entire population. Subsequent posts will focus on the many ways in which private health insurance cannot meet that challenge.

Adapted from Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, forthcoming, August 2008 by John Geyman. With permission of the publisher, Common Courage Press

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