COMPULSORY INSURANCE –ANOTHER TROJAN HORSE

By Ellen Sauerbrey

Bookies are making bets on whether some version of Obamacare will pass this year, but with five bills floating around, there is no betting on what it will look like.

The threat of a “public option” has generated the hottest protest with voters understanding that the unfair competition of a government plan will quickly destroy the private health insurance system. By contrast some conservatives have expressed support for Senate Finance Committee proposal requiring that everyone must purchase insurance. After all, they reason, isn’t it just a matter of fairness to expect everyone to bear responsibility for their own care?

In reality this is a Trojan horse that will give the government as much power to control the health care system as the “public option”. It is also unconstitutional. But then there is nothing in the text of the constitution that gives the Congress any authority to regulate health care. However, this mandate breaks new ground.

For the first time, the federal government would be ordering Americans to buy a product or service they do not voluntarily choose to purchase. They would be required to purchase health care insurance acceptable to the Health Choices Administrator. This is quite different than government regulation of an activity that individuals have chosen to undertake. Failure to comply with the mandate would result in a tax collected by the IRS but the mandate is itself a hidden tax.

A government bureaucrat would be empowered to determine what coverage a policy must have to comply with the law. Many would be required to purchase health insurance that they cannot afford or that does not best meet their individual needs. For example, many healthy young people need nothing more than a high deductible catastrophic policy. They can afford to pay the doctor for their flu shot or to sprained ankle. For them, insurance is protection against the really big stuff.

What would compulsory insurance look like? Candidate Obama described his idea of “meaningful coverage” as being at least as good as the Federal Employees Health Benefits Program. One thing that can be assured is that lobbying would be intense to include dozens of mandated benefits in the plan. For decades health care provider groups have demonstrated their effectiveness in expanding mandates at the state level. These mandates have helped to drive the cost of insurance through the roof in many states, forcing consumers to buy a Cadillac plan when all they may want or need is a basic stripped down Model T Ford.

This is precisely the problem that Massachusetts experienced after the passage of the Romney compulsory insurance plan. Lobbyists convinced legislators to make the mandatory insurance more and comprehensive and more and more expensive. Legislators have proposed requirements for over seventy additional coverages. A federal plan will experience the same political pressures to require consumers to buy increasingly comprehensive insurance and will effectively eliminate low cost and catastrophic plans.

One of the few innovations that has given consumers the incentive to utilize health care more carefully is the Health Savings Account. (HSAs) These plans have a higher deductible but allow families to save what they do not need to use annually. As would be the case with a large majority of plans currently offered by employers, HSAs would not comply with the dictates of the Health Choices Czar.

If the Massachusetts experience tells us anything, it is that compulsory insurance premiums will drive up costs, humongous government subsidies to fund insurance for those who cannot afford it will follow, and the bureaucracy will resort to price controls and rationed care as government expenditures skyrocket well beyond projections.

Sadly much of the insurance industry bought in to the compulsory coverage scheme when it seemed to guarantee them tens of millions of new captive customers. However when it became apparent that the fine for non-compliance had to be lowered to make it politically acceptable, insurers were faced with the prospect that many individuals would pay the fine and buy insurance only when faced with serious medical costs.

Now the insurance industry has turned on the plan and issued a report that the Senate Finance Committee bill will increase insurance rates. Angry Democrats are threatening repeal of the McCarran-Ferguson Act that defines insurance as a state controlled activity.

Industry attempts at appeasement, in hopes that the alligator won’t eat them first, usually backfire. Government compulsion in the market place will gobble up insurers first and then leave consumers as the ultimate victims.