NCPA - National Center for Policy Analysis

THE FOLLY OF HEALTH INSURANCE MANDATES

May 14, 2009

Many liberal politicians, public health advocates and supporters of universal coverage argue that the United States needs an individual mandate that would compel all U.S. residents to have health insurance.  They also favor an employer mandate that would force firms to subsidize much of the cost.  Additionally, supporters would require insurers to accept all applicants at premiums not rated for their health status.  Rather than make coverage affordable, these regulations drive up the cost of insurance for most applicants, according to Devon Herrick, a senior fellow with the National Center for Policy Analysis, who addressed the Congressional Health Care Caucus earlier this week.

Employer mandates:

  • Benefits substitute for cash wages in a worker's compensation package; if workers are unwilling to forgo wages in return for health insurance, firms are unlikely to offer coverage.
  • Forcing employers to provide health benefits to workers who are unwilling to bear the premium costs themselves is tantamount to forcing employees to accept a health insurance fringe benefit in lieu of wages.
  • This doesn't make coverage more affordable, instead it forces employees to bear the cost -- whether they like it or not.
  • To the extent employer are forced to provide benefits that workers are unwilling to pay for it becomes a tax on labor that inhibits job creation

Individual mandates:

  • All but three states have an auto insurance mandate -- but in many states the proportion of people who lack auto liability coverage is similar to those who lack health coverage.
  • On average about 15 percent of motorists are uninsured -- a figure very similar to those that lack health coverage (t may well be many of the same people).
  • Considering how little success states have had enforcing relatively inexpensive auto liability coverage, it would be much more difficult to enforce a costly health coverage mandate.

Special interests:

  • Individual mandates are vulnerable to special interests.
  • With mandated coverage some governmental body must have the authority to appoint an oversight board which decides when the mandate is met.
  • These groups are typically stacked with public health advocates, union officials and representatives from medical societies, hospital associations and other so-called "stakeholders," all of whom dislike lower-cost plans that include employee cost-sharing and self-insurance for small medical expenses.
  • They tend to qualify only expensive, comprehensive plans with lavish benefits, low deductibles and high lifetime payment caps.

Source: Devon Herrick, "The Folly of Health Insurance Mandates," (Presentation to the Congressional Health Care Caucus), National Center for Policy Analysis, May 12, 2009.

For text:

http://www.ncpa.org/pdfs/FollyHealthInsuranceMandates.pdf

For study:

http://www.ncpa.org/pub/ba652

 

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