Last month, Massachusetts passed a law requiring residents of the Bay State to have health insurance. California Assemblyman Joe Nation has proposed a similar bill, AB 1950, which has passed the Health Committee.
There are good reasons why California should not mimic
The number of uninsured in California is greater than the entire population of Massachusetts, and anxious Californians are tempted to force health insurance on everyone. The call to follow Massachusetts comes while its mandate system is new and untested.
Supporters of a Massachusetts-style mandate say it would make per-person state costs on health care relatively low. That would come at the greater cost of a near-state-run system funded by business taxes, individual premiums and funds appropriated by the Legislature.
Nation’s bill, AB 1950, would create a state-run Essential Benefits Program, a state pool for all Californians who are not already covered through their employers, and an advisory group to supervise the pool’s health benefits. Employers would be required to contribute to the EBP if they do not cover at least 75 percent of the cost of an essential benefits policy for their employees and 50 percent of the cost of covering the employee’s dependents.
The bill would also cap the income tax deduction on employer-sponsored health insurance in order to pay for the new program.
Nation’s Essential Health Benefits Fund will also cost the taxpayers money — an estimated $6.8 billion to $9.4 billion, according to a recent study by the California HealthCare Foundation. The California Association of Health Underwriters says that AB 1950 will cause California to lose carriers and quality.
Those that are privately insured could simply choose the government’s pool instead, meaning less diversity of insurance plans, fewer options and less competition. The next step after AB 1950 would likely be a total government takeover, with fewer choices and less innovation in health care than ever before.
In California, employers already struggle to pay their taxes and provide health care for their employees. Capping tax deductions would deter more employers from offering benefits at all. A better approach would be to address the root of the uninsured problem.
Health insurance is expensive because of state-imposed mandates to cover things like alcohol treatment and acupuncture. Small businesses currently have to buy into policies with superfluous coverage that shouldn’t really be labeled “insurance,” or pass on insurance completely.
Forcing people to buy insurance would breed resentment and resistance. Their frustration would encourage politicians who advocate price controls and single-payer health care for everyone. That would result in unacceptable waiting lists and poor access to high-tech medicine due to rationing.
A better approach would be to deregulate the insurance market and allow insurance companies to design policies that are smart and affordable for the uninsured. It would also be better to encourage individuals to invest in Health Savings Accounts.
People use HSAs in conjunction with high-deductible health insurance plans to better manage their health spending. High-deductible health plans have lower premiums than traditional plans, and employees can deposit the difference into HSAs. HSA dollars are tax-free as long as they are spent on health care.
California should blaze its own trail in health care reform. Policy solutions that encourage individuals to take charge of their own health care make more sense than mandates that are expensive, unwieldy and likely to reduce choice and innovation.
Diana Ernst is a public policy fellow in health care studies at the San Francisco-based Pacific Research Institute. E-mail: email@example.com