Massachusetts Mandated Health Insurance Will Not Be Affordable Until Insurers are Regulated to Control Costs

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Santa Monica, CA — Quality health insurance will not be affordable until it is paired with rules that require prior approval of premiums, limit insurer overhead and profit, and ensure rate changes are justified, said the nonprofit Foundation for Taxpayer and Consumer Rights (FTCR) today. Every state considering an individual health insurance mandate will address the same question, and insurer oversight is the only solution, said FTCR.

“A mandate for health insurance makes it the duty of the state to require that quality policies are also affordable. Something has to give: either the big bucks lifestyle of insurers and the rest of the medical industry or policyholder benefits. Regulation reins in the excesses of the medical establishment to make benefits affordable,” said Carmen Balber, consumer advocate with FTCR.

The board implementing Massachusetts’ health care law will issue recommendations today defining what it means to be insured in the state. A committee recommended degrading the standards for minimum insurance coverage on Friday because preliminary bids from private health insurers were too expensive. At an average $380 a month, those policies would cost someone making $30,000 a year more than 15% of their income, before considering deductibles, co-pays and other uncovered expenses.

“California and other states trying to require families to buy health insurance must understand what Massachusetts is learning — that working people struggling to stay in the middle class can’t afford to buy what the private insurance market will sell them,” said Judy Dugan, research director of FTCR. “A family of four in Boston with just over $60,000 in before-tax income — the upper limit for access to a subsidized policy — would have to pay about $10,000 a year for the minimal private policies being considered by Massachusetts, and then would face a $4,000 yearly deductible. Year over year, that cost would push financially stressed families into bankruptcy.”

FTCR has called for state laws to limit bloated health insurer overhead and profits by requiring a review of their finances and prior approval before they can raise rates. Such review is already required of auto insurers in California under voter-approved Proposition 103, and has saved motorists at least $24 billion since 1988, according to the Consumer Federation of America. Regulation must be combined with bans on “junk insurance” policies that may look cheap but fail to cover actual health care costs and do not limit out of pocket costs’an even faster route to bankruptcy, said FTCR.

“California faces a tougher struggle than Massachusetts,” said Dugan, “because its health insurance market is more fragmented, inefficient and dominated by for-profit insurers and HMOs. But the Bay State will have no better luck in providing affordable universal health coverage until insurers are forced to give something up too.”

FTCR’s recommendations for minimum coverage standards to the board last week, including a cap on out of pocket costs, no limit on what insurers must pay per treatment and affordable prescription drug coverage, can be found at:

FTCR outlined the need for rate regulation to achieve affordability in a letter to Governor Schwarzenegger:

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Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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