New York State Already Has the Health Insurance Reforms in ObamaCare

The Regulations

In 1993, motivated by stories of suffering AIDS patients, the state became one of the first to require insurers to extend individual or small group coverage to anyone with pre-existing illnesses.

New York also became one of the few states that require insurers within each region of the state to charge the same rates for the same benefits, regardless of whether people are old or young, male or female, smokers or nonsmokers, high risk or low risk…

The Results

Since 2001, the number of people who bought comprehensive individual policies through HMOs in New York has plummeted to about 31,000 from about 128,000, according to the State Insurance Department.

At the same time, New York has the highest average annual premiums for individual policies: $6,630 for single people and $13,296 for families in mid-2009, more than double the nationwide average…

The Lesson

“We have the federal health reform on steroids in terms of richness and strictness,” [says] Mark L. Wagar, the president of Empire BlueCross BlueShield.

Full article on New York’s costly lessons on insurance.

Comments (16)

Trackback URL | Comments RSS Feed

  1. Ken says:

    Could this be the reason why the US Senate is trying to pass legislation to allow federal regulation of health insurance premiums?

  2. monkeywrench says:

    One of the biggest disappointments about ObamaCare is that it does away with state experiments in health care. As a result, many good programs that were cutting costs and expanding coverage, like Indiana’s experiment with health savings accounts for state employees, or tort reform in Texas, will be made null and void. More importantly, bad programs, like the one describing New York’s failed experiment with adverse selection (a pillar of ObamCare) and Massachusetts’ adoption of the state mandate (also a major plank in ObamaCare) — which has resulted in higher prices for policies and widespread fraud through gaming of the system — are now the law of the land. It seems to me that the Obama regime wants the market for private health care to collapse so that we will all be stuck with a crummy, coercive, one-size-fits all government health rationing plan. The status quo before ObamaCare was better than what’s coming.

  3. Tom H. says:

    Of course premiums are going to soar under ObamaCare. How could they not? Attempts to hold back these premium increases will be disguised attempts to force health plans to ration care.

  4. Brian Williams. says:

    President Obama has all but admitted that premiums will increase, but we should be consoled (we are told) because of how much value we will be getting from paying more for health insurance.

  5. Larry C. says:

    I agree with Tom. Price controls will be next. Then rationing of care.

  6. Joe S. says:

    Unfortunately, as New York goes, so goes the nation.

  7. Devon Herrick says:

    Every state that has implemented these regulations — guaranteed issue and community rating — has a problem with skyrocketing premiums. This is sometimes referred to as an “adverse selection death spiral” when young healthy people leave the market after they realize what a bad deal they are getting. This makes the risk pool increasingly unhealthy. As the risk pool deteriorates, premium hikes cause new rounds of (relatively) healthy people to drop out. Finally, all that’s left is a risk pool full of unhealthy people willing to pay very high premiums because they are sick.

    The individual mandate, with its penalty, is supposed to alleviate this problem. But, lax enforcement and a penalty that’s a small fraction of the cost of coverage just guarantees people will game the system. Assuming they actually get caught, they can pay a $695 penalty (rather than $5800 for a policy) knowing they can always enroll in the event they need costly care.

  8. Don Levit says:

    How might this play out if the penalty was substantially higher, as to make purchasing insurance the rational decision?
    Don Levit

  9. Virginia says:

    All of the community rating and guarantee issue stuff makes me wonder: If you know you’re going to be sick (or at least are reasonably certain), then can you really call it insurance?

    Insurance implies that only a portion of the people in the risk pool will get sick within a set period of time. But, when you know that you’ll incur expenses for treatment, insurance becomes a mute point.

    It’s like saying, “I think I’ll buy diaper insurance even though I’m only 9 months pregnant.” No insurer would agree because it’s not really insurance.

    It doesn’t make sense to me how you can still call it insurance when the element of risk is no longer there.

  10. Bart Ingles says:

    How might this play out if the penalty was substantially higher, as to make purchasing insurance the rational decision?”

    You’d probably have something that resembles employer-sponsored insurance.

  11. Devon Herrick says:

    To answer Don’s question,

    In theory, you would have to make the penalty nearly as costly as the coverage you want people to purchase. I consider this rather coercive given that many people will be required to purchase coverage far above their expected risk.

    An insurance agent once told me that he gets numerous calls per week from college-age women, who suddenly want an individual policy (with maternity benefits), when surprised by an unplanned pregnancy. The new law would more or less encourage this.

  12. Don Levit says:

    You are right about people purchasing coverage far above their expected risk, unless you’re covering an upcoming planned medical event, such as an unplanned pregnancy you wrote about.
    People will also be purchasing policies with more comprehensive benefits than they would have preferred, further driving up the premiums.
    In addition, subsidies would seem to merely drive up the cost even further over time, just as lower deductibles would encourage more usage.
    Seems to me this is merely delaying the inevitable.
    Don Levit

  13. John R. Graham says:

    I agree with Devon Herrick, but on steroids: The penalty would have to be the same as the premiums.

    However, even then, people would not sign up because of inertia and friction costs. Also, people would expect that the state’s ability to impose the penalty would be less than perfect, so they’d take a chance on getting away with it.

    So, the actual penalty would have to be greater than the premiums. Furthermore, because ObamaCare does not change the term of health insurance from one year (which is as ridiculous as one-year term life insurance) the penalty for sick people would have to be even higher because their actuarially accurate premiums are higher!

    Obviously, such penalties are not remotely politically possible, so the social-insurance scheme experiences another death spiral (alongside the death spiral of risk): A vicious circle of subsidies and tax hikes.

  14. Bart Ingles says:

    John, isn’t the effective penalty for declining employer-sponsored insurance only about 40% of the premium? This seems high enough to make ESI popular, even though many takers could have purchased underwritten coverage for lower after-tax cost.

  15. John Goodman says:

    Employers pay at least 50% of the premium and average about 75%. So you are leaving a lot of cash on the table if you forgo your employer plan and go buy your own insurance. Plus, employer payments can be made with pre-tax dollars, whereas individual purchase has to be with after-tax money. For a middle class family, that tax subsidy is worth 40% or more of the amount the employer spends.

  16. The Best Cars 2012 says:

    Tremendous things here. I’m very happy to look your article. Thanks a lot and I am having a look forward to touch you. Will you please drop me a e-mail?