Confronting the Culprit Behind Runaway Insurance Costs

Posted by Mark Todd Engler in Individual Mandates, Insurance Regulation, Kansas, Massachusetts, New Jersey on Aug 14th, 2008 | no responses

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Flint Hills Center senior fellow and StateHouseCall blogger Gregory Schneider uses the Council for Affordable Health Insurance's annual state-by-state breakdown of mandates to explore ways government regulation – in particular, politically-motivated coverage decrees — has driven insurance costs out of the realm of affordability for many Kansans.

Schneider's policy brief shows that while the Sunflower State is faring better than states like Massachusetts and New Jersey, where "mandates are crippling the private health insurance markets and making health insurance less affordable for everyone," there's still plenty of room for legislative reform. He offers state policymakers a couple sage bits of advice for bringing health insurance costs down and creating competitive markets:

Avoid guaranteed issue. Guaranteed issue occurs when regulations require insurers to sell an insurance policy to anyone willing to buy it regardless of one's health. Guaranteed issue forces low risk purchasers into a pool with high risk purchasers of health insurance, contributing to higher costs. It tends to raise the costs of insurance for everyone in the pool and forces insurance companies out of offering plans in a state. Not surprisingly the states with the highest insurance costs and the largest number of uninsured citizens allow guaranteed issue.
Limit insurance mandates. CAHI has studied the growth of health insurance mandates in the states; as of 2007 states had more 1,900 mandated benefits and providers. Mandates are enacted by state legislatures to require coverage for some disease or treatment previously uncovered by private health insurance. Mental health coverage or maternity are common examples. What the growth of mandates in the states has done is increase government involvement in health care. This, in turn, increases costs associated with health care coverage. A 1999 study by economists Gail Jensen and Michael Morrisey of the Health Insurance Association of America showed that "as many as one in four individuals who are without coverage are uninsured because of the cost of health insurance mandates.