State lawmakers claim to hear the cries of Pennsylvania residents about the escalating costs of health care. Unfortunately, instead of pushing reforms to help lower the costs of care, some lawmakers are advocating new mandates that would drive up the cost of health insurance.
One bill, SB 1453, would require insurance companies to provide coverage, at the request of the policy holders, to any unmarried children (without dependents) up to age 30 on their parents’ plan. This type of proposal has been dubbed the “slacker” mandate.
The idea behind the slacker mandate is that young adults make up a large percentage of the uninsured, and allowing them to continue riding on their parents’ insurance plans would bring them into the ranks of the covered. SB 1453, however, ignores the primary reason why young adults often go without insurance—the high cost of coverage. This is especially true considering that most young adults use very little health care.
To date, 17 states have passed slacker mandates, with ages ranging from 24 to 30. New Jersey passed its slacker mandate in 2006, extending coverage for adult children up to age 30. Proponents claimed it would benefit 100,000 uninsured young adults. Yet in two years, only 6% of that estimate has been realized. The primary reason—health insurance is still too expensive.
Another bill before the General Assembly, HB 1150, would require health insurance providers to cover treatment for autism spectrum disorders for children up to 21, along with colorectal cancer screening. The autism mandate has gotten more attention because of the potential exorbitant cost of covering regular therapy. The current proposal would cap mandated coverage at $36,000 annually.
State health experts estimate that slightly more than 10,000 children would be eligible for autism benefits under HB 1150. A Pennsylvania Health Care Cost Containment Council (PHC4) study found that this mandate would raise the price of premiums by 1 to 1.5%. Businesses and insurance companies, however, argue that the cost of an autism mandate will be notably higher; the Insurance Federation of Pennsylvania estimates that this mandate alone could drive up premiums by 2 to 6%.
Instead of mandates, autism and young adult coverage could be offered as optional riders—individuals buying insurance could opt for the additional coverage, but they would pay more. Placing mandates on insurance providers forces everyone to pay more for insurance—even those who do not want and will never use the additional coverage.
In addition to higher costs, more people will choose to go without insurance because of higher rates, thus expanding the uninsured population. A study by NovaRest Consulting determined that each 1% increase in the cost of premiums resulted in about 400,000 people becoming uninsured nationally—or about 15,000 Pennsylvanians. The PHC4 study makes the claim that a 1% increase isn’t that much—as the cost of insurance is expected to rise 8.7% overall by next year.
But Pennsylvania already has 38 mandated coverage provisions. In total, these mandates increase the cost of insurance by as much as 50%. In essence, these unfunded mandates are a tax on working Pennsylvanians who pay for their own health insurance. And while mandates are generally promoted as ways to help “the people,” they are often pushed by health care and specialty providers that benefit from costly coverage.
Instead of more mandates, lawmakers should adopt reforms that allow individuals to purchase low-cost, mandate-lite insurance. Another alternative would be to allow individuals to opt out or waive certain coverage mandates to reduce the cost of their insurance. At least 13 states currently allow mandate-lite insurance plans. Most recently, Florida passed a law allowing the individual to purchase basic plans, free from the fifty mandates in place there. The mandate-free policies are expected to cost under $150 per month.
In light of the costs and unintended consequences of insurance mandates, the General Assembly’s diagnosis for Pennsylvania health care problems is off-course. The only way to substantially reduce the cost of health care is to put individuals in charge, not government bureaucrats. This means eliminating many of Pennsylvania’s costly health insurance mandates, not adding to them. Eliminating the burden of health care mandates will lower the cost of health care, provide more insurance to more individuals, and restore personal choice to citizens.
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Nathan A. Benefield is Director of Policy Research and Benjamen Ober, a student at Duke University, is a research intern with the Commonwealth Foundation (www.CommonwealthFoundation.org), an independent, nonprofit public policy research and educational institute based in Harrisburg.