Health Insurance Isn't Broken. It Is Operating Exactly As Designed, To Extract Money From You

Why removing the insurance middleman from primary care is not a radical idea — it is arithmetic.

What insurance was designed for

Insurance is a rational product for a specific purpose: to pool risk against high-cost, unpredictable events that individuals cannot absorb alone. A serious accident. A cancer diagnosis. A catastrophic hospitalization. These are the events insurance was designed for — low probability, catastrophic cost, impossible to plan around individually but manageable across a large pool of policyholders.

The logic is sound. It is also limited. Insurance works for catastrophic, unpredictable events. It works less well — and often spectacularly badly — when applied to routine, predictable, manageable transactions.

The Affordable Care Act requires health insurers to spend at least 80% of premium dollars on medical care and quality improvements in the individual and small-group market, and at least 85% for large-group plans. This Medical Loss Ratio requirement is the federal acknowledgment that a meaningful portion of every premium dollar does not reach a patient — it funds the administrative infrastructure of the insurance industry.²⁷ Depending on market segment, between 15% and 20% of every premium dollar goes to administrative costs, overhead, and profit before a single claim is paid.²⁸

The oil change problem

Consider auto insurance. It is a rational product for the exact same reason health insurance was originally rational: most people cannot absorb the cost of a serious accident, a liability claim, or a total loss. Pooling that risk across millions of drivers produces an affordable, sensible product.

Now imagine that auto insurers decided to expand. Starting next year, your policy covers oil changes, tire rotations, and wiper blades. Every routine maintenance visit, you submit a claim. The insurer processes it, applies your deductible, pays the shop 60 days later at a negotiated rate, and raises your premium the following year to cover the administrative cost of processing tens of millions of oil change claims.

You would immediately recognize this as absurd. The administrative overhead of processing an oil change claim costs a meaningful fraction of what the oil change itself costs. Routing routine maintenance through insurance infrastructure does not make maintenance cheaper — it makes it more expensive, while generating revenue for the insurer from the friction.

That is precisely what has happened with primary care in American health insurance. Routine office visits. Prescription refills. Standard lab panels. These are the oil changes of medicine — predictable, manageable, and made dramatically more expensive by routing them through an insurance billing infrastructure that extracts its margin at every step.

What direct primary care changes

Direct Primary Care removes insurance from the transactions it was never rationally designed to serve.

In a DPC model, the employer pays a low flat monthly membership fee in exchange for unlimited primary care access, same-day or next-day appointments, and wholesale-priced lab work. No claims. No prior authorizations. No insurer extracting its administrative margin from every transaction.

The lab pricing differential alone illustrates the scale of the markup. DPC practice data consistently show that lab work accessed through wholesale pricing costs 60–90% less than the same tests billed through traditional insurance channels. A basic metabolic panel that bills at $200+ through insurance networks costs $10–25 at wholesale pricing.²⁹

None of this means eliminating insurance. It means returning insurance to what it was originally designed for: catastrophic, unpredictable events that individuals cannot absorb alone. Hospitalizations. Surgeries. Serious accidents. The oil changes get paid directly. The serious accidents get insured.

The employer's calculation

For a mid-size employer, the DPC arithmetic is straightforward. A 300-person employer enrolling adults at $100 per month per member spends $360,000 per year on direct primary care — covering unlimited visits, same-day access, and wholesale labs.

The insurance-based primary and preventive care spend that DPC replaces — including the administrative overhead embedded in every claim — typically runs significantly higher per covered life when fully loaded. And that is before accounting for the downstream cost reductions: fewer ER visits for conditions that could have been managed in primary care, better chronic disease control reducing hospitalizations, reduced absenteeism from same-day access, and lower workers' comp costs from earlier intervention.⁵

Stop paying for "oil changes" through insurance that provides zero benefit and only drives up costs and increases the risk of harm.