States partly to blame for high health insurance costs
August 26, 2004
If youíre looking for someone to blame for the high cost of your health insurance premium, look in Governor Mark Sanfordís direction. Now that Iíve got your attention, Iíll concede itís not actually Governor Sanfordís fault, but he might be able to help.
According to the Council for Affordable Health Insurance (CAHI), a not-for-profit think tank in Alexandria, Virginia, there has been an explosion of state mandates on the health insurance industry that has driven up the cost of premiums as much as 45 percent in some states.
CAHI reports that in 1965, only seven health insurance benefits were mandated by the states. Today, CAHI has identified 1,823 mandated benefits.
Some states are much worse than others, but Republican and Democrat states are equally aggressive about insurance mandates. Minnesota has 62 mandates, the most of any state, Virginia 54 and Florida 50. Democratic-leaning Maryland has 58 mandates, while Washington, D.C., has only 16. Republican Texas has 51 mandates, but conservative Alabama has only 18. (At press time, I donít have the number for South Carolina, but may have by airtime.)
Getting states to drop the mandates will be tough, especially since the trend is moving so fast in the other direction. But there may be a politically acceptable way to counter the mandate explosion. Legislators might be amenable to giving consumer the right to access ďmandate freeĒ policies. In other words, health insurance companies would still be required to cover the mandated expenses for consumers who want them covered, but the companies could also offer mandate-free policies for consumers who want less coverage for a lower price.
The other solution is one that takes no additional legislative cooperation. People and companies could greatly expand their use of Health Savings Accounts, approved by congress last year. With HSAs, consumers buy low-cost, high deductible health insurance policies for themselves and their families. They pay cash for their routine healthcare needs and have insurance to cover their extraordinary needs. They can put up to $4,500 a year into a Health Savings Account and that money is protected from taxation, just like an Individual Retirement Account or 401(K).
Companies that offer their employees health insurance benefits have been slow to include HSAs in their offerings, even though it would save the companies money and give their employees another tax-free savings vehicle. At least one large company, with which I am intimately familiar, explained that it is waiting for other companies to lead the way to see if there are any problems they can avoid.
Just this year, the 50 states introduced 295 new health insurance mandates, further inflating the cost of health insurance. State legislators need to quit being part of the healthcare cost problem and start being part of the solution. At the same time, more people and businesses should be bolder in taking the matter into their own hands by expanding their use of Health Savings Accounts.