by Mark Craig
America’s Health Insurance Plans (AHIP) is the primary lobbying and trade association for the health insurance industry. Like any lobbying group, their goal is to protect and advance the financial interests of their members—in this case, the large commercial health insurers, including United, BCBS, Humana, and so on.
If you take a quick scroll through AHIP’s website, you’ll see that half of the recent articles are devoted to blaming hospitals for the relentless and ongoing rise in premiums and deductibles.
They point to three specific culprits: hospital consolidation, private equity ownership of hospital systems, and site-of-care price variation (the facility fees that make the same colonoscopy cost twice as much at a hospital outpatient department as at a surgery center). AHIP argues that insurers have no choice but to pass all costs on to consumers through higher premiums.
This blame-the-hospital argument has been circulating in insurance industry whitepapers and health economics journals for years. These days, it’s also showing up more and more in op-ed pages, congressional hearings, and water cooler conversations, at precisely the moment public anger at insurers has reached a breaking point.
The health insurance industry is going into overdrive on this argument because they’re looking for a scapegoat on which to pin our staggering healthcare costs. They want to direct attention anywhere but themselves while pretending they have our best interest at heart, both financial and health-wise. Many of their articles include sentences like, “Health plans are doing everything in their power to shield Americans from the high and rising costs of medical care and welcome any opportunity to discuss common-sense solutions to lower costs for everyone.”
Does anyone really believe that? After all, the less insurers pay out, the more they profit.
This is not to say that the problems AHIP points to aren’t real; they are. Hospital consolidation does reduce competition in some markets, and prices at some large urban systems have grown faster than where competition exists. Price variation between settings is in some cases indefensible. Private equity ownership of hospital systems is a legitimate and growing concern—though it’s worth noting that the largest corporate owner of physician practices in America isn’t a private equity firm; it’s UnitedHealth Group.
And while AHIP points to hospital consolidation as the primary driver of market dysfunction, new research shows insurer markets are themselves highly concentrated by DOJ and FTC standards. In fact,100% of states meet the threshold for “highly concentrated,” and near-monopoly conditions are present in states like Kentucky and Alabama.
This means that in the very same markets where AHIP accuses hospitals of wielding outsized market power, insurers are operating with comparable (and in some cases greater) pricing leverage. The market concentration problem AHIP has spent millions of lobbying dollars pinning on hospitals exists on their side of the negotiating table too—a detail that’s conspicuously absent from their narrative.
Ultimately, none of AHIP’s finger-pointing tells anything close to the whole story. And it conveniently ignores the insurance industry’s own outsized role in creating the very cost pressures hospitals are now being blamed for.
The real drivers of American healthcare costs have insurer fingerprints all over them, regardless of the narrative being pushed by lobbying organizations and propaganda front groups. In fact, our outrageously high costs are a direct result of decades of insurance corporation tactics designed to maximize profit at every layer of the system.
The way the system works, in theory, is that patients receive services, and their insurance company reimburses the hospital for the agreed-upon portion. Of course, putting aside for a moment the nearly 27 million Americans without health insurance, that’s not what’s really happening.
Insurers have designed an endless obstacle course of prior authorizations, technical and clinical denials, timely filing weaponization, AI-driven utilization management, downcoding, observation status reclassification, complex appeals requirements, retrospective audits and take-backs, contractual adjustment manipulation and more—all with the goal of delaying and denying payment in order to keeping money in their bank instead of the provider’s.
The American Hospital Association (AHA) reports that administrative costs now account for more than 40% of total annual expenses hospitals incur in delivering care, with much of that going to fighting insurance companies for payment.
How much? According to the AHA, “hospitals spent a staggering $43 billion in 2025 trying to collect payments insurers owe for care already delivered.” And this figure doesn’t even include the ever-growing burden of prior authorization and collection of copays and deductibles before care is even delivered.
Some level of utilization review is defensible to prevent fraud and ensure medical necessity. But the sharp and ongoing growth in claim denials and prior authorization requests, particularly within Medicare Advantage plans, shows that insurers are intentionally delaying and denying payment to increase their own bottom line without regard to the impact on patients and providers.
There is no other way for insurers to credibly explain the 35% increase in MA prior authorization denials between 2019-2024. Or the fact that over 80% of MA denials are overturned on appeal, showing that the vast majority of denials were never medically justified in the first place. The strategy is straightforward: Deny at scale, count on exhausted providers to give up, and pay only when pushed.
If insurers were legitimately concerned about high hospital prices, they could instantly and easily reduce prior authorization requirements. They could stop using AI to auto-deny claims and instead have a real human being with medical knowledge reviewing charts. They could stop deploying the arsenal of downcoding, reclassification, contract manipulation, and all the other weapons they’ve accumulated over the years.
Of course, they choose not to, because delay and denial is their business model. They want to drive up the price of care, line their own pockets, and deflect the blame.
The second main driver of high hospital costs is labor, accounting for 60% of total operating costs. In 2025, hospital workforce costs rose 5.6%, more than double the rate of inflation.
The reasons for these rising costs are structural and decades in the making. They include an aging population driving unprecedented demand, a pipeline bottleneck created by a shortage of clinical faculty and placement sites, and a clinical workforce approaching retirement faster than it can be replaced—all of which results in a growing clinician shortage.
The Health Resources Services Administration projects a shortage of over 108,000 full-time RNs and nearly 246,000 full-time LPNs by 2038, as well as a shortage of over 141,000 physicians. When the supply of nurses and physicians tightens and wages rise to compete for a shrinking pool of staff, that cost lands directly on the hospital’s bottom line.
While the shortage represents widespread systemic failures, the insurance industry has made the problem significantly worse, and in ways that are entirely within their control.
Here again, prior authorization requirements play a major role. The American Medical Association notes that “the PA process continues to have a devastating effect on
patient outcomes and physician burnout.”
The problem is so widespread that 94% of physicians report that PA “somewhat or significantly
Increases burnout.” When you look at the numbers, it’s easy to see why:
“The most disheartening aspect of being a clinician is realizing that the care my patients receive often hinges on algorithms designed to profit insurance companies,” says Dr. Toby Terwilliger, a physician at Grady Memorial Hospital in Atlanta. “I feel utterly helpless.”
It’s no wonder that physicians are 82% more likely to experience burnout than those in other professions. They spend a third of their work week fighting with insurance companies, prevented from delivering the care they know their patients need, and watching patients suffer as a result.
“What brings physicians joy is caring for patients,” says Dr. Marilyn Heine, clinical assistant professor at Drexel University College of Medicine. “And overused prior authorization directly gets in the way of that… [Physicians are] cutting back on their hours, changing their practice or retiring early, often because of administrative burdens which are largely driven by prior authorization.”
The same dynamic is playing out in nursing. Nurses now spend 41% of their time on EHR documentation and administrative tasks rather than direct patient care. A significant portion of that burden is driven directly by insurer requirements—prior authorization documentation, utilization review, denial management, and appeals processing that fall on clinical staff. The result is a workforce that entered the profession to care for patients and instead spends nearly half its working hours feeding an insurance bureaucracy.
Simply put, insurance companies bear significant responsibility for the burnout that’s driving clinicians out of the workforce. Insurers cannot credibly blame hospitals for high prices while simultaneously manufacturing the conditions that make those prices inevitable.
The third primary driver of hospital costs is uncompensated care, defined by the AHA as “care provided for which no payment was received from the patient or insurer.” Under the Emergency Medical Treatment and Active Labor Act of 1986, hospitals are required to provide care to everyone who seeks it, regardless of ability to pay. Since 2000, hospitals have provided a total of $745 billion in uncompensated care. Of course, “uncompensated” doesn’t mean that no one pays for it at all. Hospitals absorb the costs, which in turn are passed on in the form of higher prices.
Nearly 27 million Americans are currently uninsured. Of Americans with employer-sponsored health coverage, 51 million are currently on high deductible health plans (HDHPs). These people must pay, on average, an individual deductible of $2,578 to $3,004 depending on plan type, and up to $6,912 for families (on top of their monthly premiums) before their insurance company will begin to pay for care.
And for the 9.2 million people on Bronze HDHPs through the Affordable Care Act, their deductible is an average $7,476.
All told, that’s about 26% of Americans who are either uninsured or on HDHPs—one in every four people.
What do they do when they get sick? Very often, they delay care or forgo it entirely because they simply can’t afford it. “People facing financial barriers to care experience poorer physical and mental health, higher mortality rates, and increased utilization of high-cost resources that could have been averted with preventive and routine care,” notes the Johns Hopkins Bloomberg School of Public Health.
Emergency physician Dr. Amy Caggiula describes a patient who came to the ER with severe abdominal pain. The woman knew she had gallstones and had been told she needed surgery, but her family hadn’t met their deductible, and she couldn’t afford the surgical consult or the routine procedure. So she waited.
By the time she arrived in the ER, a gallstone had migrated and caused necrotizing pancreatitis, a life-threatening condition. She spent two weeks in intensive care and underwent three surgeries. As Dr. Caggiula writes, she “met her deductible—by about a quarter-million dollars.”
Multiply that by the diabetic who rations insulin because she can’t afford the copay and ends up hospitalized for diabetic ketoacidosis at $30,000 a stay. By the hypertension patient who stops filling his blood pressure prescription and arrives in the ER mid-stroke. By the arrhythmia patient who stretches her blood thinners to save money and comes in with a pulmonary embolism. By the man who skips his colonoscopy because he can’t meet his deductible and is diagnosed with stage four colon cancer two years later.
And this is not a problem confined to the uninsured. Even Americans with comprehensive employer-sponsored coverage and higher-tier insurance plans are increasingly forced to choose between delaying needed care, taking on crippling debt, or simply going without.
Since 1999, average annual family health insurance premiums have increased more than 360% (from $5,809 to $26,993), growing at roughly four times the rate of general inflation over the same period. Insurers will counter that premium prices reflect the growing cost of healthcare. But if that were true—if premiums were simply absorbing rising costs—insurer profit margins would more or less hold steady.
However, that’s not what happened. In the 20-year window between 2003 and 2023, family premiums grew 181% while the combined profits of the six largest insurers grew 672% (roughly 3.7 times faster). The biggest player, UnitedHealth, saw their net income grow twelve-fold.
Does that sound like typical pass-through pricing to you?
But as concerning as rising premiums are, they are at least subject to some regulatory scrutiny. The ACA’s medical loss ratio (MLR) rule theoretically places constraints on how much insurers can retain from premium revenue (although they get around this fairly easily through intercompany eliminations).
Deductibles, meanwhile, sit entirely outside the MLR calculation. Aside from a very high statutory cap on total annual out-of-pocket spending, there’s no real ceiling; it’s whatever the market will bear.
Every dollar shifted onto a patient through a higher deductible reduces what the insurer pays in claims and improves their margins. And of course, higher deductibles make it more financially difficult for patients to seek care and therefore more likely they’ll end up in the emergency room, which in turn drives up hospital prices.
AHIP and other propaganda groups not only divert attention from insurers’ role in rising prices, they also ignore a major flaw in their overall argument. They treat 6,100 different hospitals as a single monolithic villain.
The market power argument describes a specific type of institution: large urban health systems with genuine negotiating leverage, multiple service lines, and the scale to hold out in contract negotiations. But that’s a far cry from the 25-bed Critical Access Hospital in rural Georgia or the 60-bed regional hospital in Louisiana.
For rural hospitals, the “helpless middleman” framing—that insurers use prior authorization and denial because they cannot pressure hospital prices—is exactly backward. Rural hospitals lack the leverage to negotiate strong contracts in the first place. They have lower patient volumes, fewer competing facilities to create pricing pressure, often serve predominantly Medicare and Medicaid populations with little commercial insurance to leverage, and frequently can’t credibly threaten to go out of network because they’re the only hospital in the area.
This means they’re left with no choice but to accept whatever rates insurers offer. For Medicare Advantage plans, that’s 10 to 15% below traditional Medicare rates.
And then, on top of accepting below-Medicare rates, these same hospitals face the full weight of prior authorization requirements and claim denials that negatively impact patient care at 86% of rural facilities.
So not only do rural hospitals have no leverage to negotiate fair prices in the first place, they’re forced to accept low rates from insurers, and then fight a wall of denials on top of that. The insurers are the ones with all the power.
Rural hospital closure data settles the question of who actually holds the leverage. Over the last decade, more than 100 rural hospitals have closed. And 734 (one in three nationwide) are currently classified as at financial risk of closure. Almost half operate at a negative margin.
Far from extracting wealth, these institutions are being bled by the very insurers now blaming them for high costs.
As for larger urban hospitals and the consolidation that AHIP cites as evidence of hospital market power: It was largely a defensive response to insurer consolidation that happened first. As peer-reviewed research shows, the wave of hospital mergers in the 1990s was a direct response to the rise of managed care and the growing bargaining power of large insurers.
A standalone hospital with 60 beds would have had no leverage against UnitedHealth, for example. But merged with three or four others, suddenly they had enough scale to negotiate. It’s not so much predatory market behavior as it is simple survival.
As one recent analysis put it, “Insurer consolidation begat hospital consolidation, which begat higher prices, which begat higher premiums.”
Let’s be realistic about what’s really going on here. Even if every problem discussed above were resolved overnight, premiums wouldn’t come down. If the administrative burden were suddenly gone, the clinician shortage resolved, uncompensated care and facility fees eliminated, mergers undone—insurers would still be laser-focused on growing their profits year over year.
Insurers are massive corporations with fiduciary obligations to shareholders. In 2024, UnitedHealth generated $14.4 billion in net income and returned more than $16 billion to shareholders through dividends and buybacks, distributing more than it earned. When earnings fell short of Wall Street expectations in April 2025, the stock dropped 20% in a single day and CEO Andrew Witty abruptly resigned for “personal reasons.” He hadn’t even lost money; he’d simply failed to grow profits fast enough.
Competition or regulation might produce marginal reductions in specific markets, but meaningful, sustained premium relief is simply impossible voluntarily. The problem isn’t any one practice; it’s the insurance model overall, which has no incentive to fix itself.
So what can actually be done to bring prices down?
Everything documented above—administrative burden, burnout, denials, uncompensated care, sky-high deductibles and premiums—is compounded exponentially by vertical integration. Vertical integration means the insurer controls every part of the transaction: the premium, the prior authorization, the physician, the pharmacy, and increasingly the hospital relationship itself.
Vertically integrated insurers steer patients to their own affiliated physicians and pharmacies, reducing competition and raising prices. They can use employed physicians to intensively document patient conditions in ways that inflate Medicare Advantage payments. And they can use transfer pricing between subsidiaries to evade the medical loss ratio entirely—paying their own physician network inflated rates, booking it as a medical expense, and keeping the profit in the family.
There is bipartisan legislation already in Congress that would dismantle this structure. The Break Up Big Medicine Act, introduced by Senators Elizabeth Warren and Josh Hawley and backed by a large and growing coalition, would prohibit insurers, pharmacy benefit managers, and drug wholesalers from owning the medical providers they pay. Take away the ability to profit from every layer of the transaction, and the incentive to exploit every layer of it goes with it.
Restoring fairness to the system also means asking a more basic question: Do we need this kind of middleman at all?
Our employer-sponsored insurance system is so deeply ingrained that most of us have never seriously questioned whether it has to work this way. Right now, an employer pays an insurer, the insurer pays the hospital, and everyone takes a cut along the way. What if we simply cut out the middleman, and do away with the insurer so the employer pays the hospital directly?
It sounds crazy, but it’s already starting to happen.
Mark Cuban’s Cost Plus Drugs offers generic medications at transparent near-cost prices without an insurer or pharmacy benefit manager involved. The company currently offers over 7,200 medications, and they beat commercial insurance copays 80% of the time. Cuban is now applying the same logic to hospital care. His new Cost Plus Wellness platform connects self-insured employers directly with providers through publicly posted contracts. There are no intermediaries, no prior authorization requirements, and no hidden fees. Baylor Scott & White, the largest nonprofit health system in Texas, was the first major system to sign on.
On the other side of the country, Northwell Health and the 32BJ SEIU Health Fund, which covers 170,000 building service workers across New York, recently struck the largest direct contracting arrangement of its kind in US history. It includes primary, specialty, and inpatient care, all with no insurer in the transaction. Inpatient copays dropped from $1,000 to $100, and provider visits went from $40 to zero. Savings are expected to be $46 million in the first year alone.
And the concept is spreading. A 2024 survey found that 75% of employers are actively seeking out alternatives to traditional insurers. Coast to coast, businesses are asking the question the insurance industry has always feared: What exactly are we paying you for?
There’s also a more direct fix worth naming: restoring a public option to the ACA marketplace. This would allow Americans to buy into a government-run plan as an alternative to the insurance companies, with rates pegged to negotiated provider rates or Medicare fee-for-service as a backup. It wouldn’t require breaking up a single insurance conglomerate; it would simply give consumers a choice that doesn’t answer to shareholders. A handful of states have already built versions of this. Washington’s public option now covers nearly 90 percent of that state’s marketplace enrollees. Unlike Break Up Big Medicine, a federal public option doesn’t have bipartisan backing. But the principle behind it is worth consideration. When patients have somewhere else to go, insurers lose the leverage that lets them set the terms.
Our insurer-designed system is well-entrenched, and change isn’t going to happen overnight. But naming the real problem, refusing to accept the misdirection, and building viable alternatives are all good ways to start.
About Mark Craig
Mark has spent over two decades in the financial trenches of healthcare, helping providers recover revenue that insurers work hard to deny, delay, and underpay. As founder and CEO of Write-Off Warrior, he has built a reputation for deep policy analysis, insightful original research, and tenacious advocacy.
Mark is the creator and lead researcher for Preyed On: How Insurance Corporations Are Exploiting America’s Hospitals, an ongoing nationwide survey of healthcare leaders sharing their struggles and solutions for payer abuse, particularly Medicare Advantage plans. He has contributed to healthcare research with Johns Hopkins University and is a regular speaker at healthcare conferences. He regularly collaborates with lawmakers and advocacy groups to advance targeted oversight reforms that expose and dismantle predatory insurer practices.
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