Today’s Globe includes an op-ed by columnist Jeff Jacoby, Healthcare: Do we need the Lexus? Jacoby argues that mandated health insurance benefits are the reason why health insurance is so expensive, and that states should let the free market determine which benefits insurers should or should not offer.
We’ve covered this ground many, many times. We’ve called out a right-wing think tank, the Herald, then Harvard Pilgrim CEO Charlie Baker, and the Mass Association of Health Plans for spreading what we’ve called the “mandated benefits fallacy.”
We don’t defend every existing mandated benefit, and we rarely take a position on proposed new ones. But Jacoby is wrong in practice, and in theory.
First, in practice. The Division of Health Care Finance and Policy (DHCFP) looked closely at the mandates we have in Massachusetts. They concluded that the mandates add about 3%-4% to the cost of coverage. Nothing close to the 15% Jacoby quotes in his piece as the national average. For us, he’s off by a factor of 5.
Massachusetts has a smart, rational method for evaluating proposed mandated benefits. A provision of general law directs the DHCFP to study the impact of any proposed mandated benefit. The studies, which are provided to the legislature, look at a variety of factors, including:
- the financial impact of mandating the benefit on premiums, cost-shifting and out-of-pocket costs,
- the extent to which the proposed coverage might increase the appropriate or inappropriate use of the treatment or service,
- the extent to which the mandated treatment or service might serve as an alternative for more expensive or less expensive treatments or services, and
- the medical efficacy of mandating the benefit, including the impact of the benefit on the quality of patient care and the health status of the population and the results of any research demonstrating the medical efficacy of the treatment or service compared to alternative treatments or services or not providing the treatment or service.
The DHCFP has published over a dozen of these comprehensive reviews; they’re on the DHCFP web site.
As a result, the legislature has the benefit of a detailed analysis before it makes a decision as to whether or not to approve a new mandated benefit. As an accountable representative body able to refer to objective research, we think the legislature is better able to weigh the pros and cons of any proposal, than an insurer, which has the first duty of increasing its own profits or surplus.
Which brings us to our second point. Jacoby is wrong in theory, too. Jacoby claims that the free market would best sort out which benefits insurers should or should not offer. This shows a fundamental ignorance of how the insurance market works.
Suppose there was no law requiring insurers to cover diabetic treatment supplies (there is; it’s here). Any insurer that chose not to cover diabetic treatments would quickly lose members with diabetes. That insurer would be able to lower its premiums dramatically, since it not longer had expensive diabetic patients among its members. All the healthier people would gravitate to this cheaper plan, while the more expensive diabetic patients would be stuck in a more expensive plan. The plans that covered diabetes supplies would either have to raise its rates or eliminate its coverage. In order to compete, there would be a race to the bottom, as insurers stopped covering services that attract sicker and more expensive members.
That would not work. We need a strong floor underneath insurance coverage to make sure plans provide adequate benefits to protect people’s health and protect people against damaging medical debt. That’s why the “minimum creditable coverage” regulations are so important. In addition to requiring all insurers to cover a core level of benefits, the regulations also limit deductibles and out-of-pocket costs so that insurance provides real protection. The free market is not enough.