No Mercy / No Malice: Less for More

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Scott Galloway (1:17)

I'm Scott Galloway and this is No Mercy, No Malice. Nearly 165 million Americans receive health insurance through their employers. This year, premiums are expected to rise by 11 percent.

As healthcare costs rise, demand-side solutions result in higher prices and reduced benefits. It's time to look at the supply side of the equation. Less for more, as read by George Hahn.

George Hahn (1:57)

In my next life, I'm coming back as a Navy Seal, Broadway dancer, or chiropractor. However, in this life, I should have gone into insurance. Yeah, insurance. If you meet someone who has meddling IQ, exceptional EQ, and is making $600,000 a year, there's a decent chance they are in insurance. This industry thrives by tapping into an instinct, fear. We'll gladly suffer a series of guaranteed losses to avoid the possibility of a catastrophic one. Nowhere is this more evident than with health insurance. Of the wealthy nations at this year's World Cup, the US is the only one that doesn't guarantee health care. In many industrialized nations, employers play a small role via payroll deductions in funding universal coverage. But only, in America, is employment tied directly to that coverage. Meaning employers can shift rising health care costs to labor, while workers who lose their job also lose their coverage.

For people under 65, employer-sponsored plans are the leading source of health insurance, providing benefits to approximately 165 million American workers and their families. Without reducing benefits, premiums for employer-sponsored plans are projected to increase this year by an average of 11% year-on-year, the steepest rise in two decades and more than three times the rate of inflation. Prof G Media's premiums are increasing 9% year-on-year. We're seeing a slightly smaller jump thanks to the professional employer organization that handles our payroll, taxes, et cetera, allowing a firm like ours with fewer than 50 employees to participate in a larger plan. Meanwhile, many companies are shifting a greater share of their costs to their employees, with the average worker paying 8% more year-on-year to cover higher payroll deductions for premiums and out-of-pocket charges including deductibles and co-pays. If you are getting the feeling that America's private health insurance market is a drag on businesses and workers, trust your instincts.

When a market fails, our tendency is to provide demand-side subsidies. If healthcare is unaffordable, the logic goes we should subsidize access, helping more companies and people pay for it. The demand-side approach feels morally right, directing help toward those who need it. But because demand-side solutions do nothing to control costs, subsidies are akin to pouring fuel on a flame. Actually, it's worse than that. Between 2011 and 2024, the average insurance premium increased by $3,143, 78%, while health spending per person rose by $2,844, 84%, according to an analysis by Yale economist Zach Cooper and University of Wisconsin Business School professor Stuart Craig. Over the same period, insurer markups, the portion of the premium that covers insurance companies' administrative costs and profits decreased from 19% to 15%.

The growth in health spending accounted for 91% of the overall growth in average premiums. We found that health insurance premiums increased nearly dollar for dollar with health spending, Cooper said.

Over a 40-year career, Willie Sutton robbed more than 100 banks, stealing an estimated $2 million, roughly $20 million in today's dollars by the last time he was apprehended in 1952 According to legend, when a reporter asked him why he'd hit all those banks, Sutton said, because that's where the money is. If he were alive today, Sutton would likely have directed his talents toward the health care industry. Total US health care spending makes up 18% of GDP, and that's expected to rise to 20% by 2034 Health care is projected to account for 37% of all new jobs created through 2035, according to data from the Bureau of Labor Statistics. Not all growth is good growth, however. An aging population and the growing prevalence of chronic conditions– heart disease, cancer, diabetes– are the primary drivers. Several trends are sending health care costs higher. AI, which many had hoped would lower administrative costs, is actually increasing reimbursements paid by private insurers. Providers are using AI to better document care, meaning the same health care interactions generate more billing codes and greater profits. Increased demand for GLP-1s is also a factor, fueling an 81% increase in pharmaceutical spending to treat obesity and a 13% increase in spending on diabetes treatments, according to a PWC report.