The Cascade Policy Institute, a non-partisan free-market think tank, would like to present information on the economic impacts of increasing health insurance mandates. This question is focused not only the economic consequences, but also on the larger question facing policymakers: are we seeking universal health insurance, or expansive benefit coverage for the few?
- Insurance by definition is designed to provide security against unpredictable risks that a group of individuals share and pay premiums for in the event such a risk may occur. The principles of insurance include that risks covered are unpredictable and unintentional. Insurance is not an effective mechanism to provide maximum coverage to all for every foreseeable event. When predictable and regular costs are billed to insurance, in addition to occurrences for those experiencing an unpredictable risk, the cost of insurance increases — that is, more funds are needed to cover both risks and predicted events. In this case, health insurance in fact appears more as a “health benefits package”.
- Increasing coverage mandates on health insurers raises health care costs for all. Individually, each mandate may not cause a significant increase in cost. Together, they can increase health insurance by up to 50%. Oregon has 31 mandates, and there are at least 3 more under consideration this legislative session. Recent research estimates a 20% – 50% increase in costs, depending on the type of mandated coverage.1
- Increases in health insurance costs are passed on to individuals. First, it has been widely researched that employers pass on the cost of increased benefits in the form of reduced wages. This is because each employer has a fixed limit on the cost of each employee. All associated costs to employ someone must be contained within this limit. Second, employers pass this on sharing the increased cost through raising employee paid premiums. Workers are paying over $1000 more in premiums annually than in 2000.2
- Increasing health care costs leads to reduced coverage. More individuals are not covered by employer-sponsored insurance, and face increasing monthly premium costs. “[R]ising health insurance costs are the dominant explanation for falling insurance coverage over time.”3 The most affected populations are lower-income and low-skilled workers, since employers cannot afford to provide insurance for these employees. Of higher-wage employers, 65% offer health insurance, while only 42% lower-wage employers provide coverage.2 Employers also can alter eligibility for coverage, including waiting periods, hours worked, or dependent care.
- Alternatives for coverage include utilizing Health Savings Accounts (HSAs). Health savings accounts have increasingly shown to be a cost effective method of allowing individuals to choose the necessary care they need as an add on to basic high-deductible employer-provided coverage. It is tax-free account that is never forfeited. HSAs allow individuals to access the care they need, while not requiring the cost for every insured person to increase due to greater coverage mandates. The Portland Business Journal reports a 30% – 40% savings in premium costs.
1 Report by the Council for Affordable Health Insurance. The 2006 report can be accessed here.
2 The Henry J. Kaiser Family Foundation. Employee Health Benefits 2006: Annual Survey.
3 From Economic Research Initiative on the Uninsured at the University of Michigan. “Increasing Health Insurance Costs and the Decline in Insurance Coverage” Preliminary report, 2005.