Heavy regulation in New York State drives up the cost of individual health insurance.
A major component of the “health reform” legislation in Congress is sweeping regulation of the insurance industry, including “guaranteed issue” (GI) and “community rating” (CR) restrictions that will drive up costs, particularly for the millions of relatively young and healthy applicants who will be required to buy health insurance. Only New York and four other states have both of these regulations, but New York’s are probably the most stringent.
In a new report from the Manhattan Institute, researchers Stephen Parente and Tarren Bragdon analyze the effects of GI and CR laws in New York State, and their implications for the country:
Bills before both houses of Congress contain provisions similar to New York State laws that mandate guaranteed issue (which prohibits denial of coverage on the basis of health status) and community rating (which requires insurance companies to charge policyholders the same premium, regardless of their age, gender, or health status). . . .
Although New York’s guaranteed-issue and community-rating laws were adopted with the best of intentions, they have not been effective in substantially reducing the size of the state’s uninsured population. In fact, as a result of a significant increase in the cost of private-insurance coverage for individuals, the market for individual health insurance in New York has nearly disappeared, declining by 96 percent since 1994.
Have these regulations helped to contain costs? Not exactly.
Premiums for New York’s individual — that is, private and unsubsidized — insurance plans currently range from $753 to $2,655 a month for a single person and $2,205 to $6,770 for a family of four living in New York City. Annualized, New York City’s individual-insurance premiums cost at least $9,036 for an individual or $26,460 for a family. Clearly, such costs are out of reach for all but the wealthy or the very sick, who would presumably choose to obtain coverage, if they could find the money for it, only if they expected to incur costs at least equal to their premium payments.
Along with mind-bogglingly expensive private insurance, New York also has the nation’s most expensive Medicaid program . . . but despite lavish public spending (and high taxes) the number of uninsured (14% of the non-elderly population) in N.Y. is just slightly lower than the national average (15%).
Here’s the kicker: Parente and Bragdon find that repeal of New York’s GI and CR regulations would lower individual insurance premiums by 42% and encourage up to 37% of the uninsured to buy unsubsidized private coverage. Other reforms — like interstate insurance sales — would also help lower prices and encourage private coverage, saving scarce tax dollars for the poorest and sickest residents who still need help.
Do we want a private insurance market that looks like New York’s (i.e., very expensive and highly regulated)? No. Is that what we’re going to get? We’ll see.
Ironically, we’re seeing almost no debate on whether New York is the right model for the nation. For more on the report, see this and this.
– Paul Howard is senior fellow and director of the Manhattan Institute’s Center for Medical Progress and managing editor of MedicalProgressToday.com.