Commentary: Mandates send insurance costs soaring

Health insurance costs continue to skyrocket, while the number of the uninsured concurrently increases.

Health insurance costs continue to skyrocket, while the number of the uninsured concurrently increases. In "Access to Health Care and the Uninsured," the National Conference of State Legislatures recently reported that the uninsured population is growing steadily, now totaling about 46 million Americans.

"Two-thirds of the uninsured are poor (with income of less than $20,000 for a family of four), or are near-poor," the report says.

Why are the numbers of uninsured Americans rising so quickly, and why is the burden disproportionately on the working poor?

Increases in technology, complexity of health problems, and people living longer are factors in rising health care costs. One additional factor -- that we can better control -- is government health insurance mandates which require providers to cover specified health care needs.

Proposed mandates from the current Oregon legislative session include, for instance, "coverage for contraceptives" (HB 2700) and "coverage or reimbursement of medical expenses related to insured's use of alcohol or controlled substances" HB 2348.

Senate Bill 356 requires coverage for expenses occurring from motorcycle or bicycle accidents, and SB 486 covers infertility treatment.

Generally these mandate refer to both individual and group health insurance policies.

While we attempt to legislate coverage of most health care needs, a tremendous unintended consequence occurs: A greater number of individuals and families are without any coverage at all.

We should ask ourselves, are we seeking universal health insurance or expansive benefit coverage for the few? Instead of having coverage for most people at the "economy car" level, government mandates have raised the bar to the "Lexus" model of coverage, unaffordable for many.

Insurance by definition is designed to collect regular payments from a group of individuals in order to provide security against the risk of an unforeseen, catastrophic event. The principles of insurance include that the risks covered be unpredictable and unintentional.

Insurance is not an effective mechanism to provide maximum coverage for every foreseeable event for the greatest number of people. When predictable and regular costs are billed to insurance, in addition to unpredictable events, the cost of insurance increases. Naturally, more funds are needed to cover predicted events as well as unknown risks.

When health insurance covers predictable and regular costs, it in fact becomes more of a "health benefits package" than "health insurance."

Altering insurance into a benefits package by increasing coverage mandates on health insurers raises health care costs for all. Individually, each mandate may not be cause for a significant increase in cost, but collectively they are huge. Mandates like alcoholism treatment and infertility raise premiums up to 5 percent each.

According to the National Center for Policy Analysis, just covering alcoholism and infertility can raise premiums by several hundred dollars a year.

Oregon has 31 health coverage mandates, and several more are under consideration this legislative session.

The corresponding costs to health insurance comapnies are, of course, passed on to individuals. Lower-income and middle working class bear the brunt of these costs as they see their company-provided or personal policy rates go up and up and cover a lower and lower percentage of medical costs.

Another effect is that employers who provide health care benefits pass on increased costs in the form of staff cutbacks, and even reduced wages (often in the form of a freeze on salary rasises).

According to the Kaiser Family Foundation, workers today pay 87 percent more in premiums annually than they did in 2000. Wage growth in this same period was only 20 percent. Also, co-payments and deductables have risen dramatically (in many cases they have tripled or quadrupled).

Looking at it from the employer's view provides a truly alarming picture. On average, a minimum wage full-time worker earns $16,000 annually. If an employere provides health insurance coverage for that worker and three dependents, it cost him $11,500 in 2006. In other words, the cost of this one benefit nearly equal to wages paid.

Faced with this, is it any wonder that employers alter workers' eligibility for coverage by imposing longer waiting periods, reducing hours worked, or hiring only part-time?

The Kaiser Foundation also found that 49 percent of employers plan to increase the workers' portion of shared costs as soon as this year.

What can be done?

Options are available to increase health care accessibility while meeting the health care needs of specific groups. Similar to car insurance, packages can be offered at a basic level to allow more individuals to participate and have some level of insurance. Adding specific packages at additional premium costs would allow individuals to cost-share relevant benefits.

At the least, this would see that everyone has basic care coverage.

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Edited from an editorial submission from Bina Patel of the Cascade Policy Institute, a research and policy organization in Portland.

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