Benefits & ERISA Law

What Goes Up Just Keeps Going Up - Health Costs and Employer Mandates

For a long while, I have felt like a lone voice or (to mix my metaphors) at least the skunk at the garden party, when I have criticized employer mandates and, even more so, the Massachusetts Health Care Reform Act. As I have frequently discussed in various posts, the problem with these statutes is that they don't target the real problem in the provision of health insurance by employers, which is cost - that is what is driving employers to reduce or not provide such insurance to their employees. Mandating insurance, payments or penalties simply penalizes employers for not being able to afford to do something that, pricing being better, they would have done - and historically did do - on their own, which is provide health insurance as an employee benefit.

Marcia Angell, a prominent Massachusetts physician, made this exact point about the Massachusetts Health Care Reform Act, when she explained that its fundamental flaw is that:

In Massachusetts [which enacted an individual mandate in 2006], there is no real price regulation. Essentially what the mandate does is say to people, you will go into this treacherous market and buy insurance at whatever price the companies choose to charge. In effect, it's delivering a captive market to these profit-oriented companies. . . . Massachusetts already spends one-third more on health care than other states, and costs are rising at unsustainable rates. As a result, they're chipping away at benefits, dropping beneficiaries and increasing premiums and co-payments.

Now, the Boston Globe today has an article reiterating and driving home this same point, in which it reports that '[t]he state's major health insurers plan to raise premiums by about 10 percent next year, prompting many employers to reduce benefits and shift additional costs to workers.' The article goes on to point out that controlling costs was supposed to go hand in hand with the mandate imposed by the state's reform act, but that obviously has not occurred.

I have said it before and I will say it again - mandating expensive coverage that is only getting more expensive is not a solution, and no state has pockets deep enough to solve this problem on its own.

Full post as published by Boston ERISA Law Blog on September 16, 2009 (boomark / email).