Insurance Mandates Don’t Work

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A cornerstone of President Obama’s health-care plan is, as he said in his speech
to Congress, "individuals will be required to carry basic insurance,
just like most states require you to carry auto insurance." But the
tarnished history of such laws shows that making insurance mandatory,
and even making it more affordable, does not compel the uninsured to
buy it.

In California, the car capital of America, the injustice of
mandatory insurance laws sparked one of the great voter revolts of
modern history — and that still didn’t solve the uninsured motorist
problem. In 1988, the people of California passed Proposition 103,
which required auto insurance companies to seek permission through an
elected insurance commissioner for premium increases. It created an
intervener system that allows members of the public to challenge
unnecessary premium hikes. The law also made auto insurance pricing
fairer in various ways, including banning ZIP-code based auto

The Consumer Federation of American reported in 2008 that
Proposition 103 had saved Californians $62 billion on their auto
insurance. The market is competitive, prices are down, and the number
of uninsured motorists has decreased some from pre-Prop 103 levels. Yet
in the most competitive auto insurance market in the nation, the
uninsured motorist rate is still 18 percent, among the highest. That’s
true even after California took more punitive measures against
uninsured motorists. Stiffer fines, the impounding of cars and the loss
of legal rights for uninsured motorist have not significantly impacted
the uninsured motorist rate.

Giving consumers more options — public options, in fact — seems to
make more of a difference. States with extensive public transportation
systems tend to have the lowest uninsured motorists rates.
Massachusetts has a 1 percent uninsured motorist rate, the lowest. New
York’s is 5 percent, New Jersey’s 8 percent, and Connecticut’s 9
percent. New Hampshire, the only state in the nation without a
mandatory auto insurance law, has an 11 percent uninsured motorist

If the president must embrace mandatory insurance, his plan should
at least include the prior approval, intervener and elected
commissioner models that have made auto insurance cheaper. Every state
in the nation should be required to have such regulatory components in
order to lower health insurance premiums. But even that’s not yet on
the table in Washington.

Jamie Court is president of Consumer Watchdog, a nonprofit public interest group based in Los Angeles and Washington.

Consumer Watchdog
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