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.
You: Huh?
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.”
This seemingly irrational proliferation of benefit mandates is
driven by special interest groups. State legislators are under
constant pressure from lobbyists representing dentists,
chiropractors, acupuncturists, and a myriad of other health care
providers. The sponsors of benefit mandates know that elected
officials would rather go along with some obscure piece of
legislation than oppose a politically savvy and well-funded
interest group.
And the politicians usually confirm this cynicism. A typical
example can be found in none other than Barack Obama. When Obama
was a state senator in Illinois, he never met a benefit mandate he
didn’t like. As Scott Gottlieb recently pointed in the Wall Street Journal, “during Mr. Obama’s
tenure in the state Senate, 18 different laws came up for a vote
and passed that imposed new mandates on private health insurance.
Mr. Obama voted for all of them.”
THERE ARE, HOWEVER, a few politicians willing to ignore special
interest pressure. Among them is Gov. Charlie Crist of Florida, who
has pushed through legislation that will allow mandate-free
policies to be sold in his state. And, on the national level,
Nebraska congressman Jeff Fortenberry has introduced “America’s
Affordable Health Care Act” (AAHCA), which would permit insurance
companies to offer limited-mandate health plans anywhere in the
country.
The Fortenberry legislation is particularly promising because it
capitalizes on the successes states like Arkansas, North Dakota,
Utah, and others have had with mandate-free health coverage. AAHCA
permits insurance carriers to offer up to three limited-mandate
health benefit plans specifically designed for individuals and
families without coverage through an employer or some government
program. The monthly premiums for these limited-mandate plans would
be well below the cost of their mandate-heavy counterparts.
AAHCA augments its mandate solution with several
well-thought-out provisions designed to protect high risk patients
from slipping through the cracks of the individual health coverage
market. Some health care analysts fear that patients with
pre-existing and chronic conditions such as diabetes would be
unable to find coverage in a less regulated insurance environment.
The Fortenberry bill addresses this issue by expanding high risk
pools.
A high risk pool is a non-profit association, typically created
by a state legislature, that provides a safety net for medically
uninsurable patients. They are usually funded by the actual
members, so they tend not to be a heavy burden on the taxpayers.
More than thirty states have created such pools, but their funding,
structure, and effectiveness varies wildly from program to program.
AAHCA encourages the proliferation and systemization of state high
risk pools by providing for increased funding and the development
of best practice protocols.
THE FORTENBERRY LEGISLATION is not, of course, a panacea. The
problems facing U.S. health care are far too numerous and complex
to be solved in one fell swoop. Nonetheless, like Charlie Crist’s
“Cover Florida” plan, it is a serious attempt to address the
inflationary pressure caused by state-imposed benefit mandates.
And, using the most conservative estimates offered by Bunce and
Weiske, the legislation could decrease the cost of basic health
coverage by 20%. In a national insurance market, this is not small
change.
More importantly, AAHCA has the potential to make a sizeable
dent in uninsured problem by eliminating the necessity, currently
faced by many patients, of choosing between the insurance
equivalent of the GalactoMaximus and no health coverage at
all.
