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What many people struggle to understand is that the cost of health insurance is a function of the cost of and demand for health care.

According to the Centers for Medicare & Medicaid Services (CMS), the total expenditure on health care in America in 1970 was $74.1 billion, while the total expenditure on health care in 2019 was $3.8 trillion — a whopping 51.35 times as expensive. Said differently, health care is 17.7% of the gross domestic product (GDP) of the United States.

If you look at the consumer price index over the past 10 years (2011-2019), you will find that the average rate of inflation over that period was 1.75%. One could argue that this is a reasonable rate of inflation. But according to the Kaiser Family Foundation (KFF) annual study, health insurance is a different story. The average cost of health insurance in 2015 was $15,545, and the KFF reports that in 2020 the average cost is now $21,342. That’s an increase of 37%, or an average of 7.4% each year.

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