Imagine walking into a camera shop at a nearby shopping mall and having the following conversation with the sales clerk:
You: I’d like to buy a basic point-and-shoot digital. No special features, just something basic that doesn’t cost too much. I’d like to spend about $300.
Clerk: We have this GalactoMaximus ZX27000 SLR, with 19.8 effective megapixels on a 38.0 x 26.0 mm CMOS sensor, shutter speeds from 1/10,000 second to 60 seconds, a 1/250 second flash synchronization, E-TTL II flash metering, ISO Speeds of 100-2600 …
You: Ah…how much does that thing cost?
Clerk: It’s on sale for $7,995.99.
You: I can’t afford that. Show me something without all the bells and whistles.
Clerk: Sorry, we can only sell you the GalactoMaximus.
Clerk: It’s a state law.
You: Well, I guess I’ll do without a camera then. See ya.
Sound insane? Well, that’s exactly what happens to many people who try to buy basic no-frills health insurance policies. Many states arbitrarily dictate the range of health services for which insurance companies must pay, often mandating coverage that most sensible consumers would never consider purchasing in an unregulated insurance market. These states force consumers to buy the insurance equivalent of the GalactoMaximus — or do without health coverage.
In Connecticut, for example, it isn’t possible to buy an individual health insurance policy that doesn’t include coverage for hair pieces. In Alaska, you can’t buy a policy that doesn’t cover naturopaths. The citizens of California must pay for acupuncture coverage or go without insurance. In eleven states, it’s impossible to buy an individual policy that doesn’t cover marriage counselors. Fifteen states require that all health policies cover in vitro fertilization.
NOT ALL MANDATES are for such esoteric items, of course. Most involve coverage of more commonplace services. Ironically, it is the more mundane services that contribute the most to increases in health insurance premiums. The Council for Affordable Health Insurance (CAHI) estimates that mandated coverage of dental care adds 3% to 5% to average premiums. Likewise, mandated coverage of Psychologists, Podiatrists, Optometrists, and Chiropractors add from 1% to 3% each to the cost of coverage.
The cumulative effect of all these state-mandated benefits is very pricey insurance. According to Victoria Bunce and JP Weiske of CAHI, “mandated benefits currently increase the cost of basic health coverage from a little less than 20% to more than 50%, depending on the state and its mandates.” That added cost effectively prices many of the uninsured out of the individual insurance market. Gail Jensen and Michael Morrisey, in a 1999 HIAA study, estimated that “One in five to one in four uninsured Americans lacks coverage because of benefit mandates.”
All of which suggests that the states should be moving away from mandated benefits. Only they’re not. In fact, the mandate disease is metastasizing. Four decades ago, very few states had mandates and the benefits involved could be counted on one hand. Today, every state in the Union has mandates, and most have dozens. CAHI has identified no fewer than 1,961 mandated benefits and providers. And, as Bunce and Weiske put it, “more are on the way.”
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