Sunday, April 13, 2008

Hillman on Mandatory Insurance

The April 12, 2008 Rocky Mountain News has printed the following good guest OpEd by Former Colorado State Senator Mark Hillman on the problems with SB217 and mandatory health insurance:
Latest health reform will backfire
By Mark Hillman

Samuel Johnson called second marriages "the triumph of hope over experience." The same might be said for the latest health-care reform bill at the state Capitol.

For more than 20 years, crusading politicians have promised to deliver better health care to more people for less money simply by saying "make it so." With rare exceptions, the resulting legislation exacerbates economic distortions, makes insurance impractically expensive, drives insurers out of the state, and creates worse problems than originally existed.

Senate Bill 217, which the Rocky Mountain News inexplicably endorsed on April 6 ("Health-care reform for grown-ups"), seems to be a desperate attempt to "do something" without a game plan. What it does best is to create case studies in irony, hubris and cognitive dissonance.

At times, the bill's sponsors sound frenetic in their urgency, as when they propose to declare in state law: "Colorado cannot wait to address the current problems related to the delivery of affordable health care!" (Conspicuously absent exclamation point added.) Other provisions of the bill do not convey the same urgency. For example, the governor is instructed to appoint "a panel of experts" - yes, another blue-ribbon commission - to help craft a reform plan that could lead to substantive legislation not this year, or next year, but in 2010.

Elsewhere, it appears that the bill's sponsors never recognized that many of their objectives are irreconcilable. In calling for health insurance companies to design "value benefit plans" to provide a low-cost insurance alternative, the bill says that the state "shall not specify benefits or other details" of those plans. Just two paragraphs later, however, the bill stipulates a dozen mandated benefits or other details that value benefit plans must include.

Essentially, insurers are prohibited from proposing anything that's remotely innovative. They are commanded not to "interfere with the existing small-group market" but are locked into the same rating criteria that has devastated that market for most of the last decade.

Colorado's small-group market is verging on a "death spiral" - the point at which it is so overpriced and overregulated that anyone who is healthy enough to obtain insurance elsewhere has fled, leaving a pool that is disproportionately sick, aging and expensive.

Since 1998 when 536,367 people were insured through employers of 50 or less, the small-group market has suffered a mass exodus, largely due to well-intended but economically unreasonable price-fixing schemes imposed by the legislature.

By 2005 the state's population had grown by 16 percent, but the small-group market withered by 33 percent, covering just 358,264 insured lives.

If insanity is "doing the same thing over and over but expecting different results," then legislators need to own up to their own psychosis. Lowering health-care costs isn't as simple as passing a law demanding more for less.

If it were, Colorado wouldn't have the seventh-highest insurance premiums in the nation.

Legislators should permanently loosen the rating handcuffs, forcing insurers to compete for business, and repeal the mandates that have driven costs through the roof. Absent the courage to do that, they could at least allow insurers to propose choices that are popular and less expensive in other states.

SB 217 does change the existing health-care market in one dramatic respect, by signaling to insurance companies that state government is ready to force its incorrigible citizens to buy health insurance, even if it's unaffordable.

The bill calls for "a requirement that all Coloradans obtain health insurance either individually or through their employer" and provides for enforcement "though the state tax laws."

Rather than allow insurers to offer new choices or allow consumers to obtain coverage across state lines where Colorado's draconian regulations aren't strangling the market, legislators prefer to penalize taxpayers for the audacity of refusing to buy insurance that costs too much.

Even California Democrats recently figured out that it's wrong to tell working families to buy something they cannot afford just because government says so, joining Republicans to kill a heavy-handed mandate proposed by Gov. Arnold Schwarzenegger.

Economist Thomas Sowell has said, "The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics." Unfortunately, Colorado politicians seem determined to again disregard sound economics and stick consumers with the cost of their political promises.

Mark Hillman (markhillman. com) served as majority leader of the Colorado Senate.
Thank you, Senator Hillman! (His piece also appears on his website.)