Tuesday, September 29, 2009

I Hate NY (Health Insurance Regulation)

UPDATE: In our Bizarro World, the states are trying to stop the Obama Administration's proposal to compel the purchase of health insurance.

I recently addressed competition among health insurers, concluding that over-regulation, not anti-trust exemption, was responsible for high costs. In passing, I noted two examples: "absurd mandates and guaranteed issue/community rating;" the embedded links provide an excellent introduction to the topics.

Further confirmation comes in a new Manhattan Institute report on health insurance regulation in one state (footnotes omitted):
In New York, there are well over 2 million uninsured adults, representing 14 percent of the non-elderly population, a figure just below the national average. The goal of this paper is to estimate the reduction in the number of uninsured New Yorkers that would result from expanding access to unsubsidized, private health insurance.

Bills before both houses of Congress contain provisions similar to New York State laws that mandate guaranteed issue (which prohibits denial of coverage on the basis of health status) and community rating (which requires insurance companies to charge policyholders the same premium, regardless of their age, gender, or health status). Four other states have similar regulations. Yet New York’s individual-insurance market is unique in requiring insurers to offer coverage to all individuals at all times at exactly the same price. . .

The guaranteed-issue law encourages an individual without employer-based coverage to wait until he or she is sick before buying individual coverage, as insurers are forbidden to deny coverage to any individuals applying, including those already ill. . .

In addition to these laws, the New York legislature has enacted fifty-one mandates dictating coverage of certain medical conditions and inclusion of particular categories of providers in insurance plans. The state average is forty-two mandates. Accordingly, the cost of insurance in New York also exceeds the average. Certain mandates, such as coverage of alcoholism treatment and provision of emergency medical services, appear in almost every state. Others, such as ambulatory cancer treatment and hormone-replacement therapy, are found only in New York and two or three other states. . .

[G]uaranteed issue can increase premiums by as much as 100 percent.

The mandate having the next-largest effect on the size of premiums is community rating. It is responsible for a 20-27 percent increase in premiums and is also accompanied by a decline in consumer demand, as such increases usually are. . .

Although New York’s guaranteed-issue and community-rating laws were adopted with the best of intentions, they have not been effective in substantially reducing the size of the state’s uninsured population. In fact, as a result of a significant increase in the cost of private-insurance coverage for individuals, the market for individual health insurance in New York has nearly disappeared, declining by 96 percent since 1994.
The study concludes that "repeal of New York’s community-rating and guaranteed-issue laws would have the greatest impact, potentially reducing the price of individual insurance coverage by 42 percent and encouraging up to 37 percent of the uninsured to buy coverage."

All told, a helpful paper, with excellent charts and cites. But the Administration already has rejected inter-state insurance competition. Meaning, as American Spectator's Philip Klein says:
Instead of seeing failed experiments in New York and other states as a clear example of why government interference makes things far worse, Democrats have decided to impose most of these same policies on the nation as a whole, while attempting to solve problems created by government by calling for yet more government.
Conclusion: In 1975, Washington seemed to want New York to "drop dead." Given the Democrats' overly-regulatory healthcare proposals, New York soon may be able to return the favor.

(via Critical Condition)

1 comment:

OBloodyHell said...

> In 1975, Washington seemed to want New York to "drop dead."

Now if only the Dem leaders would take that to heart.