Part 2: Premiums & Profits

Jul 12

Most of us pay health insurance premiums every month expecting protection, not punishment. But buried in the fine print lies a truth few understand: a significant chunk of those dollars don’t end up funding our care.

Where Do Premium Dollars Go?

According to AHIP, here's how each dollar is allocated:

• 40.7¢ — Total hospital costs

• 11.6¢ — Doctor visits

• 24.2¢ — Prescription drugs

• 2.4¢% — Profit

• The remainder covers taxes, fees, and other administrative costs

Insurance Premium Cost Breakdown (AHIP)

While industry charts downplay the 2.4% labeled as "profit," remember: if your premium is $600–$1,600/month, that sliver adds up. In 2022, UnitedHealth posted over $20 billion in profit—a number made possible largely by policyholders’ monthly payments (Source).

And that 41¢ figure for hospitals? It’s real—but it doesn’t tell the whole story. Here are the facts:

• Americans spent $4.9 trillion on healthcare in 2023—that’s about $14,570 per person (Source).

• Between 2020-2022, on average, hospital care accounted for 41% of the $4.9 trillion spent on healthcare in the U.S.

• But according to the CDC, only about 7.9% of Americans spend even one night in a hospital in a given year (Source). 

• According to AHRQ, the top 1% of spenders account for 21.7% of total health costs, while the bottom 50% account for less than 3% (Source). 

These numbers reveal a stark imbalance:

1. A small percentage of patients—roughly 8%—consume nearly one-third of all healthcare spending.

2. Most Americans never use hospital care, yet we all fund it through premiums. 

3. When hospitals are used, it’s often for emergencies or critical events—not routine care.

This is how risk pooling works—your money helps cover others’ emergencies. But if most people never use hospitals in a given year, is 41% of every premium dollar going to hospitals really justifiable?

Claim Denials: A Hidden Tax on the Sick

So let's talk about when you do need to use your health insurance. Your coverage may exist in theory, but in practice, insurers are denying a staggering number of claims.

From Kaiser Family Foundation (KFF) data on ACA marketplace plans in 2023 (Source):

• 19% of in-network claims were denied;

• 37% of out-of-network claims were denied;

• More than 1 in 3 in-network claims from companies like UnitedHealthcare were rejected;

• Only 1% of denied claims are appealed—and even then, 56% of those appeals are upheld (Source).

What’s worse — many of these decisions are made by AI systems, not medical professionals. Major insurers like UnitedHealthcare, CVS, and Humana now use algorithms to process claims in seconds, flagging or denying care based on patterns and codes — not context.

In a 2024 class-action lawsuit, one insurer's AI tool used to assess elder care had a 90% error rate in denials. That means 9 out of 10 denials were incorrect, overturned only after costly, time-consuming appeals (Source).

Firsthand Account

As a nurse case manager in worker’s compensation, I’ve witnessed how broken the system is. Injured workers — people who were hurt doing their jobs — are too often denied essential care, despite clear need. Workers who lose limbs, suffer traumatic brain injuries, or live in chronic pain are caught in administrative gridlock while insurers stall, delay, and avoid responsibility.

One of the most ironic parts? Insurance companies assign nurse case managers like me to attend every appointment, monitor the injured worker’s recovery — and limit care behind the scenes. The cost of this oversight is massive. And while we advocate for our patients, we’re often fighting a system designed not to approve care. Some patients, like those with severe head injuries, are denied therapy for years—until attorneys intervene. By then, it’s often too late to restore function or hope. They’re left disabled for life.

Real-World Impact

These denials aren’t just statistics – they’re lived experiences from real people:

• A mother rushed her son to the ER during a life-threatening anaphylactic reaction, only to be hit with a $5,000 bill. Her insurer, Blue Cross Blue Shield of Vermont, denied the claim four times, calling the emergency visit “not medically necessary” (Source).

• That same mother, who is also a physician at the University of Vermont, has witnessed premature infants in her care be denied oxygen equipment by insurance companies – essential support for survival (Source).

• A Mayo Clinic specialist's prescription for ulcerative colitis was denied by UnitedHealthcare, leaving a patient to suffer needlessly (Source).

• One family was hit with over $20,000 in denied prenatal and delivery claims — despite having full coverage (Source).

Who Bears the Cost?

When insurers deny care, the savings don’t go back to patients – they often go straight into the pockets of CEOs and shareholders. Industry charts may downplay the 6% labeled as "profit," but if one individual’s premium is $600–$1,600/month, that sliver adds up. In 2022, UnitedHealth posted over $20 billion in profit—a number made possible largely by policyholders’ monthly payments (Source). 

Meanwhile, the burden on everyone else keeps growing:

• Patients face rising premiums, unexpected bills, and long delays in treatment.

• Providers are spending $7.2 billion annually on administrative costs and fighting insurance denials and appeals (Source). 

And the profit-driven system doesn’t stop with insurers. Top hospital executives now earn upwards of $18 million a year. In today’s healthcare economy, every hospital bed represents potential profit, and that pressure drives decision-making—often at the expense of the patient.

I saw this firsthand while working in hospice. Hospital case managers were frequently under pressure to discharge patients—not when it was safe, but when it was financially advantageous. If a patient couldn’t go home safely, they were still pushed out quickly, often with nowhere to go. The concept of a “safe discharge” began to feel obsolete. We were constantly reminded that beds had to be turned over. Volume meant revenue—the more patients cycled through, the better for the bottom line (Source).

And here’s the twist: the more people covered by insurance, the bigger the hospital’s payout. But that creates a perverse incentive. Hospitals and insurers engage in a bitter tug-of-war – not just over who foots the bill, but over how little they can each get away with paying. And the patient? More often than not, they're the one left holding the bag. This is the business of healthcare: profits over people, paperwork over patients.

What About Our Taxpayer Dollars?

While privately insured patients often face denials for life-saving care, taxpayer-funded programs like Medi-Cal, California’s public health insurance for low-income individuals, cover a wide range of gender-affirming treatments. These include hormone therapy, breast augmentation, facial feminization, hair removal, and gender reassignment surgeries that can cost up to hundreds of thousands of dollars – paid for by taxpayers (Source). 

Under current policy, these interventions are classified as “medically necessary” for individuals diagnosed with gender dysphoria, a condition defined by the Diagnostic and Statistical Manual of Mental Disorders (DSM-5) as the psychological distress caused by a mismatch between one’s gender identity and sex assigned at birth (Source). 

Yet the long-term outcomes of such treatments are still under active study. A recent analysis found that approximately 8% of individuals who undergo gender transition later detransition, often due to doubts in gender identity (Source). While detransitioning remains relatively uncommon, its existence underscores how complex these medical decisions are—and why blanket classifications of “medical necessity” for such extreme, life-altering procedures warrant ongoing scrutiny.

Meanwhile, many others—including cancer patients, people with rare diseases, or those seeking mental health or palliative care—routinely face delays, denials, or out-of-pocket burdens for treatments considered too costly by insurers. The fact that some patients can access expensive procedures with full public coverage while others struggle to obtain basic care through private or public systems highlights a deeper issue: a misalignment in how we define medical need and allocate healthcare resources.

This contrast isn’t just confusing—it’s infuriating to many. It raises a fundamental question: Who decides what care is essential, and why are some forms of suffering prioritized over others when public dollars are at stake?

What Needs to Change

The system is out of balance – but here are steps we can take to fix it:

• Demand transparency. Patients and taxpayers deserve to know exactly where their dollars go – how much is spent on care versus administration, profits, and executive salaries.

• Hold insurers accountable. Require insurance companies to publicly report denial rates, appeal outcomes, and the reasons behind their decisions. 

• Redefine medical necessity. We must revisit how we define what’s “medically necessary,” ensuring resources are prioritized for interventions that are evidence-based, life-saving, and broadly aligned with public health needs.

• Speak up: Most importantly, stay informed of your rights, challenge unfair denials, share your story, and support policies that protect patients. Use your vote and your voice to push for a more equitable, transparent system.

Know Your Rights: The No Surprises Act (NSA)

In a system full of hidden costs and fine print, it’s easy to feel powerless. But you do have protections – and one of the most important is the No Surprises Act, which went into effect on January 1, 2022. Here’s what you need to know:

What the No Surprises Act Does

The NSA protects you from unexpected medical bills in situations where you had no choice or control over who treated you. That includes:

• Emergency care: Even if you’re taken to an out-of-network hospital, you cannot be billed more than your in-network cost for emergency services.

• Non-emergency care at in-network hospitals: If you’re unknowingly treated by an out-of-network doctor (like a radiologist or anesthesiologist) at an in-network hospital, you can’t be billed extra for it.

• Air ambulance services: The NSA bans surprise bills for out-of-network air ambulances—a common source of five- and six-figure bills.

What It Stops

Before this law, patients could unknowingly receive care from out-of-network providers—even when they went to an in-network facility—and later be hit with "balance bills" (the difference between what insurance paid and what the provider charged). The NSA stops that practice in most cases.

What It Requires

• Good Faith Estimates: If you're uninsured or self-paying, providers must give you a written estimate of costs in advance – including what you'll be charged and what services are included.

• Right to dispute: If your actual bill is $400 or more over the estimate, you can dispute it through a federal arbitration process within 120 days.

• Notice & Consent: Providers must inform you of your rights and get written consent at least 72 hours in advance of a non-emergency out-of-network service being provided.

Why It Matters

The No Surprises Act doesn’t solve every problem in our system, but it does give patients real power to push back against predatory billing – especially in emergencies or complex hospital settings. You shouldn't be punished financially for being unconscious or in a medical crisis. 

➤ Learn more: Read the official NSA Key Protections guide from CMS: 📄 Download the PDF

It's Time for a Change

You pay premiums expecting care—not confusion, surprise bills, and denied claims. Every roadblock you face isn’t accidental—it’s a feature of a system built to obscure, not to protect.

Stay informed. Know your rights. Request detailed explanations for your care, your charges, and your denials. Don’t be afraid to challenge what doesn’t make sense. Insurance companies often count on your frustration to outweigh your fight. They rely on you giving up after hours on hold, being bounced between billing reps, and facing unclear answers. But those tactics are meant to wear you down—not because you're wrong, but because you're right.

Change happens when people persist. It happens when we get involved, speak up, and share our stories. You are not alone—and your experience matters.

Share your story by contacting us directly. Stay informed and help demand transparency in healthcare.

— Stephanie Alexandre, RN, MBA, Founder of Alexsol Health