Health Insurance Mandates

on Sep 30 in health care tagged by Trevor Hicks

One of the issues related to establishing universal health care in the US (a principle I support by the way) is the idea of mandating the purchase of health insurance. I have not heard of a state that doesn’t mandate auto insurance for car owners so it wouldn’t be some unprecedented intrusion into private liberty.

Leavitt, Hubbard and Hennessey explain the logic behind mandates in the Wall Street Journal. With laws guaranteeing access to health insurance, the healthy have an incentive to free ride:

Like the homeowner who waits until his house is on fire to buy insurance, younger, poorer, healthier workers will rationally choose to avoid paying high premiums now to subsidize insurance for someone else. After all, they can always get a policy if they get sick.

To avoid this outcome, most congressional Democrats and some Republicans would combine guaranteed issue and community rating with the requirement that all workers buy health insurance—that is, an “individual mandate.” This solves the incentive problem, and guarantees that both the healthy poor 25-year-old and the sick higher-income 55-year-old have heath insurance.

I’ve remarked before the oddity of progressive wags writing about insurance companies as if they were the devil’s incarnate minions simultaneously considering legislation that would force everyone to buy their products. Now if we were talking about products similar to the auto insurance mandates I referenced above, essentially requirements that catastrophic coverage be purchased, I could probably get behind the idea. But the experience of Massachusetts with health insurance mandates is very different as explained by Megan McArdle:

There are a lot of reasons for that, but one is mandate creep, something that has particularly bedeviled New York.  A mandate essentially becomes an opportunity for various medical service providers groups to pick the pockets of consumers and taxpayers.  They lobby to get their service included in the mandatory package.  Consumers use it, because hey, it’s practically free.  Insurance costs go up–but there’s no reason not to keep on using podiatrists  and massage therapists, because your personal actions will not make a difference in bringing costs down.

In other words, the various rent-seeking corporate interests involved co-opt the regulatory apparatus and turn it to their own benefit.

I’ve complained about both ideas, but there still a reform in here I could support. Create a public plan that offers low-cost catastrophic & chronic (ie something like $100k+) coverage, maybe throw in a loan facility to handle the $10k to $100k events, and then mandate only that people have coverage that meets or exceeds this bare minimum.