Guaranteed Issue, Community Rating Lead to High Premiums

Reason Magazine takes a look at the dismal track record of state “reform” efforts to date. It cites New York as “exhibit A” for its guaranteed issue and community rating provisions. It says, “In 1994 just under 752,000 individuals were enrolled in individual insurance plans, about 4.7%  of the nonelderly population. This put New York roughly in line with the rest of the U.S. Today that figure has dropped to just 0.2%. By contrast, between 1994 and 2007 the total number of people insured in the individual market across the U.S. rose from 4.5% to 5.5%.”

It adds Washington state as another example.”In 1996 similar reforms in Washington state preceded massive premium spikes in the individual market. Some premiums increased as much as 78% in the first three years of the reforms-10 times the rate of medical inflation.” And it cites a Health Affairs study as saying, “in addition to Washington and New York, the individual insurance markets in Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, and Vermont “deteriorated” after the enactment of guaranteed issue.”

It also notes about Massachusetts that, “Health insurance premiums in the Bay State have risen significantly faster than the national average, according to the Commonwealth Fund, a nonprofit health foundation. At an average of $13,788, the state’s family plans are now the nation’s most expensive.”

From Health “Reform” To Government Retiree Bailout

The behind-closed-doors squabble over the so-called “Cadillac” tax on high-cost health benefits is that it’s really about bailing out public-sector retiree health benefits, especially at the state and local level. Today’s New York Times reports that the tax won’t hit these folks until 2018. If I were a betting man I’d guess that that date will be pushed out even farther before this deal sees the light of day.

The tax is now going to hit plans that cost $8,500 for an individual and $23,000 for a family, which is way higher than the current cost of employer-based health benefits.

Until recently, state and local government employers did not have to report retiree health obligations on their balance sheets like private employers do. Of course, this meant that weak local authorities negotiating with strong union leaders resulted in unfunded liabilities that are unexpected and out of control. A recent study estimated such liabilities to be $558 billion nationwide, although the extent of the crisis varies a lot between states. There are no prizes for guessing that New York, New Jersey, and California fare the worst.

The Congressional Budget Office has yet to score this partial bailout of public-sector retiree benefits, but it will certainly send the (already debunked) pledge of deficit neutrality into the dustbin of history. Unless, of course, they figure out yet another tax to patch the hole in the CBO’s score.

If They Won’t See the Light …

… maybe they’ll feel the heat. Some tea-party activists are targeting Sen. Robert Menendez (D-New Jersey) for recall, presumably in part over his vote for the health “reform” bill.

It’s a long-shot attempt, I suppose, but more unexpected things have happened.

A New Twist on the War on Drugs

New Jersey officials asked residents to drop off unused prescription drugs for incineration. They got an estimated 3.5 million pills.

The stated reason for “Operation Medicine Cabinet”: It’s for the children. “For a majority of young people — especially first-time users — the most common way to find those pills is to hit their parents’ bathroom. ‘It is our belief that these are a real gateway drugs,’ Angelo M. Valente, executive director of the Partnership for a Drug-Free New Jersey.”

At least the DEA didn’t conduct random bathroom searches, looking for Vicodin pills from 2003.

An Electoral Test of Health Reform in New Jersey

The debate on health reform will get an electoral test next month in New Jersey, as Democrat Gov. Jon Corzine, Republican Chris Christie and independent Chris Daggett offer different visions on the subject.

Christie, for example, favors letting residents purchase health insurance sold by companies regulated in other states, a move that Corzine opposes, saying it will lead to “Swiss-cheese policies.” Corzine also trumpets a new law letting parents keep their adult children on as dependents up until age 31, a stop-gap measure if there ever was one.

Christie, for his part, says “I want to give young people (a choice to buy a policy) that covers catastrophic illness and accidents and regular check-ups, but they will not need the full range of mandates that every policy has.”

Daggertt, meanwhile, seems to letting companies sell policies that are truly insurance (rather than pre-paid services), but on the condition that everyone be required to buy some sort of insurance.

There are many other issues in the election, which will not in any case be a referendum just on health reform options. But you can expect advocates on either side to claim the results as a harbinger of their side once the votes are counted.

States With Obama-Style Insurance More Expensive

Most Americans receive the health coverage they cherish through their employer. Chances are, if it's a large employer, it's a self-funded plan, and (as with Medicare) the insurance company is merely administering the program.

It's only smaller employers and people seeking policies in the individual market who actually buy insurance from carriers.

The individual market is where people face the most choices and have the most choice — except in those states with Obama-style regulations. People are spending their own money and so must confront directly the value of more insurance protection versus other uses of their cash. Not surprisingly, they often opt for less generous coverage with less onerous premiums.

To discover this world of choice, just go to ehealthinsurance.org. Pop in your state, age and gender, and then ponder a myriad of choices to secure protection from catastrophic health expenses, the proper function of insurance.

A 55-year-old man in Allentown, Pa., can choose from 99 plans starting as low as $141 a month for hospital coverage. A zero-deductible HMO plan costs $418 a month. Or he can pick a more flexible PPO, with a higher deductible and pay less monthly out-of-pocket for the premium.

Young people, "the invincibles," often skip insurance, because they have few assets to protect and little fear of getting sick. The congressional Democrats' solution is a tax increase by another name: Force employers to keep paying for them on their parents' expensive plans until age 26.

Yet the market has responded with products targeted at the needs of the young, such as Wellpoint's Tonik, which offers excellent protection, prescription drugs and preventive care for less than $100 a month for the under-30 set.

So if 50-somethings can get a plan at less than $200 a month and youngsters can sign up for less than $100 a month, where's the problem? Why, it's in New York and New Jersey — precisely the states that have adopted Obama-style reform — restricting insurers from charging rates based on age and preventing them from saying no due to poor health.

Change the zip code from Pennsylvania to neighboring New Jersey, and choice plummets even as the cost per plan skyrockets. In New York, our 55-year-old has only 12 plans to choose from.

The reason is simple: When people can buy fire insurance after their houses are burning, only those with a fire in the attic apply for insurance. Soon, only those who expect a blaze can afford the high premiums.

Massachusetts enacted such a system in April 2006. A CEO of a major health network reports exactly this problem: Despite the state mandate that everyone buy and keep insurance, his company is experiencing a drastic increase in people who purchase new coverage, run up big bills that are fully covered and then drop the plan.

People are simply gaming the system. Since they can acquire insurance any time, regardless of health, why pay the premium in times of good health?

This is the future of ObamaCare executed by a liberal Congress whose leaders long for a government-dominated system.

The current health-care environment offers all of the components that are touted as true reform — health co-operatives, health-insurance clearinghouses and tax subsidies for low-income Americans that ensure access to health care. But it doesn't give Washington control of reimbursement rates or health plan design, or the power to force people into insurance plans.

U.S. Index of Health Ownership 2nd Edition Is Here

Pacific Research Institute has published the 2nd edition of the U.S. Index of Health Ownership, the only ranking of health care in the states that uses criteria of individual choice.

Americans lack the basic freedom to make their own health care decisions. The Index measures the degree to which individuals, be they patients, health professionals, entrepreneurs, or taxpayers, “own” the health care in their states.

The lack of health ownership is a real problem. Almost half of the country’s health care spending is in the hands of the government, instead of patients themselves. The other half is governed by regulations inflicted upon doctors, health plans and patients.

The Index uses 24 variables to quantify how state laws and regulations affect the liberty of citizens involved in state government health plans (primarily Medicaid), the private health-insurance market, and the provision of medical services. It also assesses the effect of medical tort on people’s freedom to engage health services.

Alabama, Montana, Nebraska, North Dakota, and New Hampshire finished in the top five, as the states that allow their citizens the highest degree of health ownership. Alabama leads the pack primarily because of a lightly regulated private insurance market, and good control of state government programs. Also, the state performs well on medical tort indicators. Alabama’s regulatory environment for providers favors competition, and government health programs run more effectively than in most states.

New York, Massachusetts, Rhode Island, Vermont, and North Carolina rounded out the bottom five, as the states in which the government has taken the most undue control of health care from its citizens. This is the second year that New York was in last place. The state suffers from government health-care programs that are out of control, a grossly overregulated private-insurance market, and almost completely uncompetitive provider markets.

A full listing of all 50 states and their rankings is contained in the Index.

The Index will give concerned citizens a good basis to demand reforms from their state politicians that will put American families in charge of American health care, instead of government and special interests.

Live in New Jersey? Pay 40% More

New Jersey's laws and regulations have limited the selection of health care policies, driven insurers out of the market, caused premiums to soar, and significantly increased the number of people without health insurance in the state.

That's the conclusion of Assemblyman Jay Webber. New Jersey residents pay exorbitant rates for health care coverage — an average annual health insurance premium of $10,398, or nearly twice the national average.

Not surprisingly, 40% fewer people buy their health insurance on New Jersey's individual health insurance market today than in 1992.

The climb of health care coverage costs has hit New Jersey small employers the hardest, with the average cost of providing health insurance doubling in the last six years. In 2007 alone, the average cost of an insurance policy for small companies rose by an average of 9.8%, to $7,251 per employee.

Allowing New Jerseyans to purchase regulated health insurance policies from other states would empower consumers to seek out and buy health insurance policies that best fit their needs and budgets, said Assemblyman Webber. For example, Pennsylvania residents can purchase health insurance policies for as little as 40% of the cost of comparable polices in New Jersey.

New Jersey Embraces Autism Mandate

It looks like New Jersey will become the 14th state to mandate insurance companies cover autism treatments. The legislature finalized work on an autism mandate bill yesterday and the governor is expected to sign it.

Reading the news story, I was a little confused, to be honest. The way it was written ("New Jerseyans with autism and other developmental disabilities would get up to $36,000 in certain treatments covered each year, under a bill that cleared the Legislature today") sounded to my ears like legislators set up some state program to hand over money to families with autistic kids. This legislation, however, is not that honest. Legislators will receive kudos for helping autistic kids but they don't have to find the money to do it (an almost-impossible proposition given the New Jersey budget mess). Instead, legislators mandate that everyone pay more for insurance to help a few people gain access to expensive therapy that is of questionable efficacy.

Don't you just love the policy process?

Yet Another Autism Bill

A legislative committee in New Jersey approved the idea of requiring insurance companies to cover treatment for autism, up to $36,000 a year. (Expect that number to go up in time.)

Developments such as this illustrate the fact that health insurance hardly operates by the logic and discipline of free markets. It may not be much of a stretch to say that in some states, insurance companies operate not as private corporations but quasi-nongovernmental organizations, or quangos.

By the way, I wonder how much coverage New Jersey Medicaid extends for autism treatment.