Health insurance needs more options

Americans view health insurance very differently than other types of insurance. When someone says they have great health insurance, what they really mean is that their insurance covers a variety of medical issues, including eyeglasses, dental, preventive care, and regular checkups. Other types of insurance, such as homeowners insurance, cover the big issues but cover everyday issues like mowing the lawn and cleaning gutters at a self-pay rate.

Further complicating this difference between health insurance and other types of insurance are state and federal mandates that require policies to cover a variety of medical issues. The Affordable Care Act, also known as Obamacare, requires all health insurance policies to include 10 specific mandates. Each state has its own mandates, which often overlap with federal mandates. As of a few years ago, Wyoming had 32 health benefit and provider mandates, Montana had 31, and Idaho had 10.

Instead of government-mandated “insurance” or benefit programs that try to cover every health-related activity, health insurance should function more like other forms of liability insurance used to reduce risk, such as auto insurance, home insurance, and life insurance. Just as it makes little sense to use insurance to pay for gas or mowing the lawn, state and federal governments need to move away from the idea that health insurance covers all health-related occurrences. True liability insurance should be for catastrophes and emergencies. Routine medical services should be paid for out-of-pocket, when necessary.

Each health care mandate increases the overall cost of health insurance. In reality, not everyone needs all of the necessary mandates. For example, a healthy, unmarried 30-year-old man doesn’t need maternity coverage, but his health insurance plan pays for it. Women don’t have to be screened for prostate cancer.

Mandates are a classic example of politically influential interest groups lobbying elected officials to include payments for their services in all insurance policies. Mandates limit competition, raise prices, and severely limit patient choice.

Supporters of mandates argue that because no one can predict a patient’s future needs, the government should by law require people to purchase high-cost insurance. While it is true that the future is unknown, it is possible to design high-deductible catastrophic insurance plans to cover any serious medical problems that may arise in the future. Except in very unusual circumstances, affordable auto and home insurance will cover any serious problems and provide millions of dollars of coverage to individuals and families if necessary.

Additionally, Health Savings Accounts (HSAs) allow you to save for everyday medical expenses. These accounts require individuals or families to purchase high-deductible accident insurance to cover large medical expenses, but instead provide a tax-advantaged savings account to save for everyday medical purchases. Savings can be accumulated from year to year, and an individual’s account balance can be carried from job to job.

As mentioned above, the number of mandates varies by state. Unlike other insurance, health insurance is sold on a state-by-state basis. A reasonable first step would be to allow interstate purchasing of health insurance. This would significantly increase patient choice and make the market more competitive. Health insurance that is mandated by some state governments would still be available, but consumers would have to decide for themselves whether to purchase it.

Americans on all political lanes agree that the fundamental problem with American health care is the ever-increasing cost of health care. Reducing or eliminating government health insurance mandates altogether would be a surefire way to reduce those costs.