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."
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.
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