Insurance Industry Stung By Health Care Deal

With much of the health care reform debate still focused on the wisdom of including a government-run, “public” health insurance “option,” too many of us are neglecting a far more insidious feature of the Democratic proposals: the mandatory purchase requirement. Under each of the bills moving through Congress, every person living in the United States would be required by law to have health insurance. And, if your employer doesn’t provide you with it, you’ve got to buy it yourself or pay a monetary penalty.

What’s more, the proposals would make it more difficult to get some of the options that are available now — particularly the low-cost insurance plans that cover only catastrophic health events and have substantial cost-sharing features. And, depending on which bill would eventually be enacted into law, Congress, state insurance commissioners, and/or a federal Health Choices Commissioner would get to dictate what benefits have to be covered in every policy, and would be empowered to determine whether any given plan even qualifies as health insurance. The end result will be considerably higher costs for almost every person living in the country.

On the other side of the equation, the Democratic proposals would mandate that every insurance company has to issue a policy to anyone who wants to enroll, and would forbid premiums from being based on the enrollee’s health status. The expectation is that healthy young people would subsidize the health care costs of those who are older or sicker. But states that have enacted these guaranteed issue and community rating mandates see premiums rise and healthy individuals drop their coverage. After all, if insurers must issue a policy to all comers, why not wait until after you get sick to sign up?

Early on in the health care debate, the insurance industry agreed to support guaranteed issue and community rating, but only if Democrats would implement the mandatory purchase requirement. That made Democrats happy because the number of uninsured Americans would fall if being uninsured were made illegal. (So much for “my body, my choice,” eh Nancy Pelosi?) And the insurance industry was happy because more people would be forced to buy their products, hyper-inflated prices or not.

Trouble is, in all of this back-door finagling, someone forgot about ordinary Americans. It turns out that most people don’t like the idea of being fined for choosing not to buy health insurance. In turn, Democrats were forced to lower the penalty on people who choose to go without it. And that means there will be fewer healthy people in the system to subsidize the rest. All of which leaves the insurance industry holding the bag.

Janet Trautwein, CEO of the National Association of Health Underwriters, has an op-ed in today’s Wall Street Journal whining that a weak individual purchase mandate is bad for everyone, and insisting that Congress give people less choice, not more. It’s unfortunate, to be sure, that hundreds of millions of Americans will face higher health insurance premiums generated by ill-considered legislation. But, no one should feel bad for those in the health insurance industry who tried to cut this lousy deal.

Someone should tell Janet Trautwein that, if you lie down with dogs, you might get fleas.