NCPA - National Center for Policy Analysis


October 20, 2009

Back in the early 1990s, New York Gov. Mario Cuomo pushed reforms aimed at fixing the state's health care system.  Those reforms were supposed to reduce the ranks of the uninsured as well as prevent insurance companies from unfairly charging people with health problems more than others or dropping sick people from the insurance rolls.  They were also supposed to spark greater insurance competition, say Stephen T. Parente, a professor of finance at the Carlson School of Management at the University of Minnesota, and Tarren Bragdon, an adjunct fellow at the Manhattan Institute and chief executive officer of the Maine Heritage Policy Center.

One of the biggest things Cuomo did was to impose government mandates called community rating (CR) and guaranteed issue (GI).  The former prevents insurers from charging people more based on their health or age, and the latter forbids denying coverage to anyone who wants to buy it.  These two mandates are now a central part of reforms advancing in Congress. In New York, enacting them has been a mistake, say Parente and Bragdon.

But New Yorkers didn't get a more competitive insurance market.  A 2007 report by the actuarial consulting firm Milliman surveyed the damage: 

  • It noted that "by 1996 GI and CR requirements effectively eliminated the commercial individual indemnity market in New York."
  • While the reforms were supposed to help keep insurance affordable, "premiums for the two (remaining) standard plans increased rapidly," with one researcher noting "insurers increased premium rates 35 percent to 40 percent in this period."

Today, New York's private individual insurance market is among the nation's most expensive and highly regulated:

  • New York City residents buying private, unsubsidized individual insurance coverage pay at least $9,036 a year for individual coverage and $26,460 for family coverage.
  • New York's average premiums in the individual market are more than twice the national average, according to a 2007 eHealth Insurance survey.
  • Today, 14 percent of New York's population lacks coverage, essentially the same as the national average of 15 percent.
  • Partly because of the high costs of private coverage, nearly one in four New Yorkers is enrolled in Medicaid.
  • New York's Medicaid program is the nation's most expensive, requiring high local and state taxes to support it.

Source: Stephen T. Parente and Tarren Bragdon, "Why Health Care Is So Expensive in New York," Wall Street Journal, October 17, 2009.

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