Opposing view: Mandatory insurance is wrong way to go

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The following commentary by FTCR President Jamie Court, and Research Director Judy Dugan, was published on Monday, January 28th, 2008 in the Sacramento Bee.

Proponents of the health insurance bill written by Gov. Arnold Schwarzenegger and Assembly Speaker Fabian Núñez are down to one argument: Anything is better than nothing.

If that’s true, why not simply remove from the legislation the most controversial and draconian provision: requiring all Californians to show proof that they have a private health insurance policy?

Our group opposes forcing Californians to pay for private insurance policies without any curb on what insurers can charge or definitions of the benefits they will receive.

We support many of the other aims of the Assembly Bill X1 1. However, in order to satisfy the demands of the medical lobby, the bill has been larded with out-of-control costs that the state will force upon every Californian if mandatory insurance is part of the package.

Without any definition of what the product is or effective curbs on what it costs, a mandate would allow insurers to provide policies that don’t really cover patients. Think $5,000 deductibles, high co-pays, no limit on out-of-pocket costs. These are the very concerns expressed by the speaker previously, but which he failed to address.

The Legislature even refused to apply the prior approval regulation that auto insurers face today when trying to raise premiums.

Health insurers have increased premiums 78 percent since 2001, compared to a 17 percent increase in inflation. The same insurers charge on average $12,000 a year to insure a family of four. While AB X1 1 does require that insurers take no more than 15 percent of a premium for overhead and profit, this creates the perverse incentive to allow inflated and bogus medical costs so insurers can take 15 percent of a bigger premium. It’s the same incentive Schwarzenegger’s agent has to get him top dollar for movie roles.

Those who argue that the bill would reduce the costs of the current system need to read the bill closely, since the medical-insurance complex’s charges are uncapped and unregulated in the bill. Drug companies, for instance, recently dropped their opposition after the bill’s bulk-purchasing mechanism was neutered. Incidentally, the industry then gave $400,000 to Núñez’s term-limits extension measure, Proposition 93.

Núñez and Schwarzenegger can still provide subsidies to the poor, universal coverage for kids and make the rules of the insurance market fairer. They should reject the insurance industry’s demand that the state be converted to a customer delivery system for an inefficient and unregulated private market.

Consumer Watchdog
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