President Obama and Democrats in Congress want to impose two costly health insurance regulations nationwide.
The first is community rating, which prohibits insurers from varying premiums based on an individual’s health status. The second is guaranteed issue, which forces insurers to sell policies to everyone at anytime, even individuals who wait until after they are sick to obtain insurance. Community rating and guaranteed issue are designed to raise healthy people’s premiums in order to subsidize the premiums of high-risk individuals.
It is important to work to ensure that high-risk individuals can access affordable coverage. However, community rating and guaranteed issue are such inexact, inflationary, and nontransparent efforts at achieving that goal that they can end up being counterproductive.
States currently regulate health insurance, so to see what effects these regulations could have nationwide, it’s important to look at their impact on state markets.
Dr. Bradley Herring of the Johns Hopkins Bloomberg School of Public Health and Dr. Mark Pauly of The University of Pennsylvania’s Wharton School recently conducted a study “test[ing] for differences…between states with both community rating and guaranteed issue and states with no such regulations.”
The Herring and Pauly findings should give Democratic policymakers pause:
“Overall, our results suggest that the effect of regulation is to produce a slight increase in the proportion uninsured, as increases in low risk uninsureds more than offset decreases in high risk insured.”
In other words, after the regulations were enacted, the number of high-risk individuals who purchased coverage because their premiums went down was somewhat less than the number of low-risk individuals who dropped coverage because their premiums went up.
An editorial in The Wall Street Journal elaborates on the lack of logic behind such regulatory reforms:
ObamaCare would impose on all 50 states rules that have already proven to be failures in numerous states. Because these mandates would raise the cost of insurance, ObamaCare would then turn around and subsidize individuals to buy the insurance that the politicians made more expensive. Only in government could such irrationality be sold as ‘reform’.