NCPA - National Center for Policy Analysis


December 17, 2009

The theory behind individual mandates is that insurance becomes more affordable when purchased by a larger, healthier group of applicants.  Adding individuals to the risk pool who are less expensive to insure (and currently the least likely to buy it) would theoretically lower the cost for all those insured.  But in practice, individual mandates have had a different effect on what people pay for health insurance, says Dr. Linda Halderman, a General Surgeon and policy adviser in the California State Senate.

Some proponents of individual mandates try to make an analogy to the auto insurance industry.  But this is not a logical comparison, says Halderman:

  • Auto insurance is mandated only for those who drive, a far smaller pool than those who would be mandated to buy health insurance.
  • Consumers shopping for auto insurance have competition on their side; policies can be purchased from insurance companies offered in other states, driving down premiums as agencies try to compete with other carriers.
  • Inexpensive policies are available across state lines, unlike health insurance plans sold only within a single state; for instance, Bostonians are prohibited from buying North Dakota health plans that cost 60 percent less than those sold in Massachusetts.

Also, limited coverage auto insurance policies can be purchased, offering only the liability coverage required by law rather than more expensive comprehensive plans, says Halderman:

  • Under California's Low Cost Auto Insurance Program, premiums can be less than $25 per month.
  • Meanwhile, state regulations bar the health insurance industry from offering low-cost plans with limited coverage even when the consumer wants that choice.

Despite the fact that all 50 states mandate auto insurance coverage for drivers, up to 25 percent of state residents remain uninsured, says Halderman:

  • Even with far simpler opportunities available for enforcing the auto insurance mandate (e.g., requiring proof of coverage before obtaining a driver's license and registration), the California Department of Insurance estimated in 2003 that 14.3 percent of all registered vehicles were uninsured.
  • This does not account for unregistered vehicles or those with expired registrations, of particular importance in parts of the state with a high percentage of undocumented immigrants on the road.

According to Halderman, individual mandates, though popular in political rhetoric, do not address the fundamental problem people face when buying health insurance: it is expensive.

Source: Linda Halderman, "Senate's Solution: Consumer Choice Is Dead on Arrival," American Thinkers, December 16, 2009.

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