Health care in the United States is a study in contradictions. We spend nearly $5 trillion a year on care – almost 20% of our national economy – yet our health outcomes trail nearly every other wealthy nation. Last year, North Carolina spent $94.5 billion in health care costs. That’s equivalent to 16% of our state’s GDP. Despite spending this much, North Carolinians aren’t getting healthier or spending less. The system isn’t just expensive, it’s buckling and failing to deliver.

Here’s another contradiction: North Carolina is the number one state in the country for business – a hard-earned point of pride. Yet, we rank as one of the, if not the most expensive state in the country for health care. Rising health care costs are a strain on business.

When we throw around numbers in the billions and trillions, it’s easy for the problem to feel abstract. To provide perspective, if the price of common household purchases increased at the same rate as health care over the last 60 years, here’s what you’d pay today:

• $18.94 for a gallon of gas;
• $230,000 for a midsize car; and
• $1.3 million average cost for a single-family home.

As the CEO of Blue Cross and Blue Shield of North Carolina (Blue Cross NC), the state’s largest not-for-profit, mission-driven health insurer, I believe our organization has a responsibility to confront these contradictions head-on. North Carolinians deserve transparency about where the money in health care goes and why it’s so expensive.

Perhaps the best place to start is with a question many people ask: Where does my premium dollar go? We know there are real questions and real frustrations about what people pay for, why it costs so much and how their premium dollars are used. 

On average, here’s a breakdown of how each premium dollar at Blue Cross NC is spent:  

Eighty-seven percent of a premium dollar goes to pay medical expenses. Here’s how that 87% breaks down: 

• $0.28 – Medical Professional Services 
• $0.26 – Outpatient Services
• $0.18 – Pharmacy Costs
• $0.15 – Inpatient Services

Blue Cross NC uses the remaining $0.13 of the dollar to operate our business. Here’s how the $0.13 breaks down: 

• $0.10 – Customer Service / Operating Expenses
• $0.02 – Taxes
• $0.01 – Profit (Fully insured business income after tax)

Given this, the next question that’s often asked is: if we’re spending so much on the delivery of health care, why aren’t we getting more?

In North Carolina, there are so many reasons pushing the cost of health care up. I think about it in the following buckets: lack of transparency, misaligned incentives, fragmented system, drivers of health, access, and legislation and regulations. 

Let’s dive into a couple:

Can you think of anything you pay for where you don’t know the cost upfront? Only in health care. Even within the same town, a person can receive a bill at one facility, visit a different facility on the other side of town and the cost can vary significantly, often without a clear reason. This makes it hard for consumers to shop for affordable care. 

Our health care system is built on competing incentives, often guided by profit over purpose, which leads to fragmentation. Care isn’t coordinated around the whole person, which increases the chances that patients receive duplicative services. 

North Carolina also has an aging population. By 2030, one of every five North Carolinians will be at least 65 years old.

Regulation and market volatility at both the federal and state level makes care more expensive. For example, North Carolina has more than 50 health insurance mandates. Regulations and mandates can inadvertently drive up cost due to complexity or requirements that are not adequately funded. 

All these factors, and many more play a role in making health care so expensive. The people and businesses of North Carolina are being squeezed and it’s not sustainable. 

The truth is, everyone – health insurers, hospitals, drug companies, policymakers, advocacy groups, employers and even consumers – has a role to play. 

There is no more time for debate. After decades of policy efforts and short-term fixes, we’re now staring down a full-blown affordability crisis. Market volatility is growing. Consumers and businesses are feeling the strain. The gap between what care costs and what people can afford is only getting wider. We can no longer ignore the crisis we face. 

In my next piece, I will outline what I believe is health care’s reckoning, how I believe Blue Cross NC must act, and how we must all work together. North Carolina is filled with people who show up in hard moments. This is a hard moment, and we owe it to all North Carolinians to get this right.