I agree that this is how insurance works. Normal insurance is a hedge against anamolous disaster. Medical care is something that practically everyone will need at one point or another, i.e., it is not an anamolous disaster, and therefore insurance is a problematic billing model from the get-go.

We should start by saying that insurance is often considered a perverse industry because their incentives are inverted. Normal businesses make money by providing a product or service to clients, and the incentives are therefore aligned. Insurance makes money by explicitly NOT providing a product or service in exchange for your money; if they have to give you the thing you've paid for, they are less profitable. The more frequent claims against a particular insurer are, the more incentive they have to make things difficult, because some people will ultimately give up and that'll be one less (or lessened) payout that the company must supply. As medical insurance policies will likely have several claims per policy per year, they have an incentive to be the worst type of insurance.

Most people with home insurance will never use it, because their house is not likely to get robbed, or catch on fire, or encounter even more esoteric occurrences. Considering the multi-hundred-thousand dollar investment most people have in their homes, a nominal fee of a few hundred bucks per year is entirely reasonable to protect that asset.

The opposite is true of medicine. Most people will get medicine sometime, and it's not uncommon to need access to medicine several times per year (even excluding the chronically ill). Even car insurance will often go several years without being used, but not medical, especially not if you have a policy that covers multiple people (policy holder + spouse + dependents).

Insurance simply does not work for services that are commonly required, and that's what it boils down. There is a major feeding frenzy operating on the backs of the nation's health, and everyone is pointing the finger at the other entity, and again, there's more to it than just insurance, but insurance is now and always will be the most major cause of problems in this industry. The only way to bring it back to sanity is to expose it to true market forces; the clientele must spend their own money to receive medical services, and therefore medical providers must set prices within an affordable range or go out of business. The leeches who do nothing but sit there and push paper must be removed, plain and simple. No amount of whining about how it will put some people out of work, etc., can be tolerated on this. The fact is that insurance is a very, very bad thing to have so deeply ingrained in our medical system, and we won't see major improvement until those people go away.

Other countries have band-aided it by saying "OK, I see meidicine 'costs' inordinate amounts of money, we'll just write what is effectively a blank check to the industry", but that's not how we should do it in America. We must accept that market forces must dictate the prices, that hospitals the size of universities are probably not plausible, and that the whole industry must be brought back down to earth. The industry is obviously not going to like that, but it must be done. We need some ballsy politicians who can make it happen.