by Dr. Roy Cordato
Senior Economist, Emeritas
It is now widely recognized that Obamacare’s insurance mandates are one of the many parts of that legislation contributing to the increasing costs of health insurance. These mandates abandon the concept of consumer sovereignty by forcing people to purchase health insurance coverage that they may not need or want.
By way of analogy, imagine that the government passed a law mandating that all computers that are sold meet certain specifications. All computers would have to meet very specific storage capacity, processor speed, and software requirements. As corporations lobby government officials to ensure that the law mandates inclusion of their respective products, the legally-compliant computer system would likely far exceed the needs of most users and be costly to purchase.
The computer’s features and capabilities would not be needed by everyone all of the time. So, proponents of the law would argue that it may be needed by some of the people some of the time. And when it is needed, it really should be readily available.
If this were an actual proposed model for the regulation of computers, everyone would realize that it would eliminate meaningful consumer choice and drive up computer costs for everyone. The law, in effect, would be saying that, unless you buy a computer with these specified features, you are not allowed to buy a computer at all. Why would the government do such a thing?
And yet, under Obamacare, this has been the model for the provision and sale of health insurance.
Fortunately, at the federal level, it is now recognized that this approach is destructive and harmful to health care consumers. It drives up insurance costs and ultimately squeezes many people out of the health insurance market entirely. This is in spite of the fact that failure to purchase insurance will result in stiff fines collected by the IRS. It is one of several reasons why there is about to be a major overhaul of the system that promises to eliminate the micromanagement of what can and cannot be sold as health insurance. The idea is to put the decision of what is included in health insurance policies back into the hands of consumers.
But even if this level of micromanagement is abandoned at the federal level, the citizens of North Carolina will still be stuck with its own version of this oppressive model. Similar to the hypothetical law on computer sales, North Carolina mandates that every health insurance plan sold must cover 56 health care services. The state mandates a wide range of “benefits” that include chiropractic services, many dental services, marriage therapy, HPV vaccination, and nurse midwifery (even for policies only covering men or women past childbearing years). In fact, North Carolina ranks in the top 15 states nationwide in the number of mandates imposed on insurance companies and, therefore, purchasers of health insurance.
While these mandates are touted as regulations that are imposed on health insurance providers, they are, in fact, a straight jacket that North Carolina’s health insurance consumers are being forced to wear. Essentially, they tell North Carolina citizens that, unless you purchase a plan that covers all 56 or these services regardless of your own personal needs, you are not allowed to buy health insurance at all.
Of course when you mandate benefits, you also mandate costs. These are costs that people must incur, whether they wanted to or not. Similar to the expensive hardware components and software packages that would be placed on all computers in our hypothetical example, these mandated benefits are being paid for with higher insurance premiums. Every benefit adds close to one percent to the cost of the insurance. Ultimately, it is a tax on health insurance policies.
The General Assembly should follow the lead of Congress and the Trump administration and eliminate this hidden tax. These mandated benefits, and therefore costs, should be repealed. In doing so, the legislature will be putting North Carolina’s consumers of health insurance back in charge of their policies. There is no reason why a Republican legislature should continue to enshrine this particularly harmful aspect of Obamacare by micromanaging the content of health insurance policies.