Quiz (apropos to the Mass. Healthcare bill just signed by the governor):
Who said this: “One of the biggest fallacies is that keeping people healthy will save money, and that's why we should do it. That is complete baloney.” ?
[This editorial in today’s WSJ speaks to a dirty little secret of health insurance for individuals in certain states: Guaranteed Issue. This feature of the law in certain states requires insurance companies to sell policies at the standard rate even when an applicant is already sick. It’s like requiring companies to sell flood insurance to residents when a hurricane is approaching.]
Massachusetts Governor Mitt Romney signed a bill recently that's being praised as a model for how to achieve "universal" health care. But while the governor claims his plan is market based, it does little to reform the regulations that have made coverage in his state among the most expensive in the country.
How bad are Massachusetts' insurance regulations? One good indicator is that it's one of few states in which eHealthinsurance doesn't sell policies in the individual market. eHealthinsurance is an Internet insurance brokerage that makes it easy for people in most of the 50 states to find out what kind of coverage is being offered in their areas. We tried to price coverage in the Bay State and came up empty. So we called the company to ask why. "Guaranteed issue," was Chief Operating Officer Bob Fahlman's instantaneous reply.
Guaranteed issue is the name of a regulation that requires insurance companies to sell policies to all comers, even those who wait until they're sick to seek coverage. Naturally the requirement to accept those free riders makes insurance much more expensive for everyone else. It also means insurance companies aren't eager to be found by consumers, even though they are generally required to sell in the individual market in order to be able to offer coverage through employers. Yes, you read that right, they don't want customers.
So in Massachusetts, insurers hide, in part by refusing to pay commissions to brokers such as eHealthinsurance. Their prices are also a disincentive. An eHealthinsurance survey earlier this month found the Aetna HMO in Boston asking $1,719 a month to cover a young family of four, and $560 for one nine-year-old child.
The new Massachusetts health care legislation does little to address the root causes of this cost problem. Guaranteed issue is explicitly preserved. And while a new insurance regulation board could in theory do something about other costly mandates, it's not likely to do much in practice.
The $200 per month target price Governor Romney is talking about for the state's new mandatory insurance is higher than 80% of the individual policies eHealthinsurance reported in a study of 80,000 customers nationwide late last year. The range of average monthly premiums for individuals was as low as $98 in Michigan and as high as $245 in New Jersey and $379 in New York. The latter are the only two guaranteed-issue states in which eHealthinsurance sold individual policies during the study period, by the way. Massachusetts didn't make the cut.
We note all this because there's a far simpler way to begin tackling the problem of the uninsured than the Massachusetts path. To wit: Let the market start operating as it should. Companies like eHealthinsurance have already got a great infrastructure up and running and in many states consumers have real choices when it comes to health insurance products. States like New York and New Jersey, meanwhile, might try getting the regulators out of the way before following the Bay State in forcing people to buy needlessly expensive coverage. <<
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