Imagine if cars had to be sold this way. Say that I just need a cheap car to get to work every day, but the law prevented dealerships from selling me a car without gold rims, tinted windows, and free oil changes for life—in other words, all the bells and whistles. My budget may be $5000 for the car, but the dealership may only be able to sell cars that start at $30,000 because of all the mandates. The result isn’t that I end up getting the more expensive car with the mandated features—but that I might have to go without a car entirely.

That’s the problem in American health care in a nutshell. Some people may find themselves overpaying for a product they don’t want, and others may end up going without a product that they really need because it’s so expensive.

There’s a wrinkle in that health care paradigm, though. While longer-term insurance plans typically fall under the auspices of federal regulation and often have state coverage mandates tacked on, “short-term medical insurance” (or STM) can often sidestep the mandate layers and offer a product that is insurance first and a maintenance plan second, if at all.

That may sound a bit jarring if you’re used to health insurance as maintenance, but imagine how much homeowner’s insurance would cost if government required insurers to include a grass-mowing benefit, or if a car owner’s insurance had to include an oil change benefit. STM generally avoids those additional costs by focusing  on the financial backstop that insurance is actually supposed to be.

Having greater latitude in finding a plan that fits your medical needs (and your budget) is an important step in fixing the health care cost problems we see in America today, and that’s what one proposal from the House appears to offer. The legislation would expand the duration that an STM plan can last from six months to a year in Missouri, and it would also make clear that the STM plan a consumer might purchase is different from the insurance plans they might be used to. Specifically, the plans would have to state plainly in their documents that,

This policy may not cover preexisting conditions, including conditions you may currently have and are unaware of but are not diagnosed until the policy’s term. This policy may not cover certain essential health benefits, including prescription drugs, preventative care, and emergency services. Before you realize benefits under this policy, you may be responsible for a deductible and/or coinsurance. Be sure to discuss these items with your insurance broker before purchasing a short-term medical policy.

In other words, a consumer may not have every medical condition covered—the maintenance plan would be limited—but if they were hit by a bus, they’d have a financial backstop because they’d at least have the STM’s insurance protecting them.

And as the name suggests, STM is generally used for shorter periods of time than more fully-featured health maintenance plans. Some people may need it to fill a temporary gap in employer-sponsored coverage, and others may prefer it as an alternative to vastly more expensive Obamacare plans, even though STM plans are “skinnier” in terms of benefits and were generally non-compliant for purposes of the mandate penalty. 

Expanding the scope of STM coverage would help to resolve both of the problems I articulated at the beginning of this blog post—the limited incentive to shop around for coverage, and the multi-layered onion of mandates—that drive up the cost of the average health “insurance” plan.

This STM expansion idea is an excellent one that helps to meet the needs of people who really want coverage but don’t want or can’t afford what the government is trying to impose on them. I hope the idea receives increasing attention as the session continues.

The post Short-Term Medical Insurance Proposal Offers Opportunity to Get People Coverage appeared first on Show-Me Institute.

The Obama administration will delay a crucial provision of its signature health-care law, giving businesses an extra year to comply with a requirement that they provide their workers with insurance.

The government will postpone enforcement of the so-called employer mandate until 2015, after the congressional elections, the administration said yesterday. Under the provision, companies with 50 or more workers face a fine of as much as $3,000 per employee if they don’t offer affordable insurance.

We already know that the Affordable Care Act incentivizes small, growing businesses to send new jobs overseas, but it also has affected whether companies hire new employees . . . and whether they fire them.

Forty-one percent of the businesses surveyed [by Gallup] have frozen hiring because of the health-care law known as Obamacare. And almost one-fifth—19 percent— answered “yes” when asked if they had “reduced the number of employees you have in your business as a specific result of the Affordable Care Act.”

The poll was taken by 603 owners whose businesses have under $20 million in annual sales.

Particularly in that light, it’s no wonder the administration delayed the provision. Economically, the law is a fiasco: diverting hiring, delaying hiring, and causing employment cutbacks. Awful. It’s no wonder businesses and unions are mad about the law. Isn’t it clear that the financial well-being of our nation demands that Obamacare be reopened and reconsidered?

The post Obama Administration Delays Employer Insurance Mandate Penalties Until 2015 appeared first on Show-Me Institute.

For the vast majority of Americans, if you have health insurance that you like, you are either going to pay more for it or lose it. If you do not have it, you will have to buy insurance even if you do not want it or pay an excessive penalty (tax).

We are also going to add almost $2 trillion to our already staggering federal debt.

This ruling does not change the fact that the Affordable Care Act (a.k.a., Obamacare) is bad law and is going to hurt the American people. It needs to be repealed.

The post Lose-Lose Decision appeared first on Show-Me Institute.

These special exemptions encourage corruption and lobbying. This system rewards parties that make large campaign contributions in exchange for special favors. It also encourages private businesses to hire teams of lobbyists to ensure that new laws and regulations don’t put them out of business.

The Washington Times Water Cooler blog asks:

If the new health care act is so great why are companies applying for the HHS exemption waivers to avoid the mandate? And more importantly, if companies should be so excited about the health care law, why is HHS granting waivers to “90-plus” who apply for them?

My thoughts exactly. I also wonder: Won’t this push even more of the costs of the health care regulation onto the groups and individuals that aren’t issued waivers?

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Right now we’re estimating the cost of the minimum benefit package that everyone will be required to have at $4,750 for individuals and $12,250 for families — understanding that the proclivity in this Congress and in this Department of Health and Human Services is to add benefits, not reduce them, making the package even more expensive. That translates into a minimum health benefit of $2.28 an hour for full time workers (individual coverage) and $5.89 an hour (family coverage) for fulltime employees.

Granted, the law does not specify how much of the premium must be paid by the employer versus the employee — other than a government requirement that the employee’s share cannot exceed 9.5% of family income for low- and moderate-income workers and an industry rule of thumb that employers must pick up at least 50% of the tab. But the economic effects are the same, regardless of who writes the checks.

In four years’ time, the minimum cost of labor will be a $7.25 cash minimum wage and a $5.89 health minimum wage (family), for a total of $13.14 an hour or about $27,331 a year. (I think you can see already that no one is going to want to hire low-wage workers with families.)

Employers could also dump workers onto government exchanges, but that costs them $2,000 in penalties per instance. Either way, the costs of employing low-productivity employees will rise dramatically, which means that not only will the health care reform bill fail to increase access to health care for many low-income people — it may also cost them their jobs.

The post Neither Health Nor Wealth appeared first on Show-Me Institute.

As of 2009, Missouri had 41 mandates for health insurance. Considered singly, no individual mandate had a large impact on premium costs, but they each had a marginal impact. Every incremental increase in the cost of health insurance premiums leads to the possibility that some unknown number of individuals and businesses are no longer able to afford their previous coverage.

Here is a look at mandates in Missouri (data compiled from the Council for Affordable Health Insurance):

As we’ve discussed before here at Show-Me Daily, injecting competition into the insurance market is really the only long-term solution that will both increase coverage and lower health care costs. Sarah Brodsky has also suggested tuition tax credits for autistic children as another alternative to insurance mandates.

Regardless of how one looks at the issue, mandates do not serve as a solution. The list provided by CAHI contained 130 different mandates throughout all of the states and Washington, D.C. Health insurance would be prohibitively expensive for far more people if every policy had to cover all 130 items, and there will still be many other conditions or diseases that are not covered. Does every 20-year-old want insurance against Alzheimer’s disease? Does every 60-year-old want insurance against autism?

With more choice in the insurance market, people can better choose for which illnesses or conditions they wish to be insured. Eliminating the way in which insurance is tied to employment and encouraging health savings accounts would allow individuals to purchase portable, cost-effective policies, saving for foreseeable health-related expenses while hedging against unknown future risk.

The post Missouri’s Many Health Insurance Mandates appeared first on Show-Me Institute.

What I do find shocking in the comments is that some people don’t seem to be even remotely familiar with how insurance is supposed to work. The best example comes from commenter bogie90:

And do you buy autism insurance before your child is born just in case they have autism? Who would do that? And the insurance companies aren’t going to cover after the fact, remember pre-existing conditions?

Yes, of course you buy it before the child is born in case they have autism. That’s what insurance is for: to protect you against tragic but unlikely outcomes. You buy fire insurance for your house just in case you have a fire. However, you can’t insure your house against fire once it has the pre-existing condition of being on fire. At that point, insurance is just dollar trading to repair the damage from the fire. This might be one of the big problems with the debate over health care: people do not actually know what health insurance is.

The post “You Keep Using That Word. I Do Not Think It Means What You Think It Means.” appeared first on Show-Me Institute.

There has been a lot of charged rhetoric on the topic of autism mandates, and I’m positive that its proponents have had the best of intentions. (In fact, I played softball last weekend with one of the sponsors of the bill, Sen. Eric Schmitt, and he seemed like a great guy.)

It’s important, though, to understand the economic mechanisms behind mandates. Insurance becomes prohibitively expensive if the government attempts to mandate coverage of everything that could happen to anyone. As I’ve mentioned before, high-deductible health savings accounts are one of the best ways to handle these sorts of issues; once the policy owner exceeds a certain deductible, their insurance can cover the cost of treatment. The high deductible helps to minimize costs by reducing the health care wedge between patient and doctor, as well as reserving insurance for its intended purpose: large, catastrophic costs. Market competition is a more effective way to bring health coverage to all children with autism and other conditions, and not just a select few.

(Also, a quick thanks to John Combest for linking to my op-ed in the Springfield News-Leader! My op-ed will also be available in the Sunday edition of the Joplin Globe.)

The post Tune in Monday morning! appeared first on Show-Me Institute.

Gov. Jay Nixon’s desk no doubt holds many bills with supporters eager to see them passed, although one of them will raise the cost of health insurance in Missouri when it is signed. The Autism Spectrum Disorder Coverage bill, H.B. 1311, requires state-regulated private health insurance companies — those that cover small and medium-sized businesses — to cover up to $40,000 annually for screenings and therapy for children with autism spectrum disorders. Although well-intentioned, this mandate will necessarily raise the cost of premiums for Missourians, making it more difficult for individuals and small businesses to keep their health insurance plans.

Autism is a problem in Missouri, and it is easy to be swept up by the heart-wrenching stories of families with autistic children. But there are many disorders and diseases that afflict people — children and adults alike — and mandated coverage of all or even most of these problems would make insurance prohibitively expensive for everyone, especially for those who have diseases that are not given state protection.

A mandate of any amount increases health insurance costs, and this bill’s substantial commitment would assuredly have a noticeable effect. Small businesses are particularly cost-sensitive, and the autism bill will increase the cost of doing business in Missouri — although estimates of how much costs would increase vary, depending on who is doing the calculation. This bill would exempt small businesses if the provisions demonstrably raised their premiums by more than 2.5 percent, but any increase would likely price some marginal number of businesses out of the insurance market, forcing them either to cut coverage or reduce hiring. At the same time, these costs bring only a relatively small gain for Missouri families; an independent report estimated that the bill would only help up to 350 families.

The bill also raises the cost of autism therapy by increasing licensing requirements. It establishes a board to certify applied behavior analysts, the professionals who administer the type of expensive therapy that the bill covers. This regulation will add an extra barrier to entry in becoming an analyst, reducing competition in the field. For families not covered under the mandate, this will raise their therapy costs.

State mandates raise health insurance costs across the board, and decrease people’s access to affordable coverage. In the long run, the most effective solution for families with autistic children — or any other disorder — is for officials to open the insurance market to further competition, giving providers a practical economic incentive to cater to niche health care markets. Despite the good intentions of those aiming to help some families with autistic children by supporting this insurance mandate, it will simultaneously hurt other Missourians who could face significant cost increases or even the potential loss of their own health insurance coverage.

Caitlin Hartsell is a research assistant with the Show-Me Institute and a graduate student in public health at Washington University.

The post Well-Intentioned Autism Bill Also Carries Negative Consequences appeared first on Show-Me Institute.

Beyond travel expenses, though, the signing of this bill will be costly for Missouri. I’ve written before about why I think an autism mandate is bad policy for Missouri. The bill may be a huge gain for the 300 to 350 families that will be helped by the mandate, but the rest of Missouri will pay for it in higher insurance costs and foregone jobs.

The post Seventh Signature and the Bill is Free! appeared first on Show-Me Institute.

This morning, I received an email message from a group that supports the autism bill urging its supporters to contact the House speaker, who they believed had been preventing the bill from reaching conference for a final vote. The email mentions that the speaker’s family is involved with the Ozark Center for Autism in Joplin, and questions how he can support causes that help autism spectrum people, yet also oppose the bill.

There is a disconnect in that logic. Opposing the insurance mandate does not indicate a lack of caring about autistic children and their families. Instead, it may follow from a recognition that government mandates necessarily increase health insurance costs for everyone. This hurts the families and children who suffer from conditions that are not state-protected. It also hurts individuals who can no longer afford their insurance premiums because increased premium costs have priced some marginal number of them out of the market. Opposing the bill demonstrates an understanding that the proposed legislation has effects other than the immediately foreseeable subsidy for autistic children, but also the unseen effects for individuals who have not been granted the protection of a similar state mandate.

This example clearly demarcates the differing approaches taken by competing political ideologies. The Ozark Center for Autism is a private charity that specializes in providing the applied behavior analysis therapy that the mandate seeks to cover. Supporting this group is an active measure to help autism-spectrum children without creating a government mandate. Supporting the activities of a private charity does not increase the costs of health insurance for other individuals.

Government mandates, on the other hand, raise health care costs for the rest of the population — even when those mandates are targeted to disabilities or disorders that we particularly hope will be supported. It would be prohibitively expensive to mandate coverage of every potential health problem, but increased competition in health insurance markets would allow families to choose the coverage that best suits them. Individuals who feel strongly about helping those who are afflicted with a certain condition can donate to a private charity that provides services to assist those who can’t afford treatments on their own. Involving the government is not the only solution to such problems, nor the most effective one.

The post Not Against Children With Autism ? Against Mandates appeared first on Show-Me Institute.

Interestingly, exemptions will be granted for some very specific cases. The most common ones are financial hardship, religious objections, and those without coverage for less than three months. The exact level of financial hardship is spelled out in the law quite succinctly; the only people who qualify are those with incomes below the tax filing threshold (in 2009, the threshold for taxpayers under age 65 was $9,350 for singles and $18,700 for couples).

The other side of the situation is that if you have employer-sponsored health care insurance, or pay for your own insurance, you can keep your current policy. However, the new law requires a higher minimal standard of benefits for all participants. As a result, it is expected that by 2016 all policies will cost 10 to 13 percent more than the expected future cost of a current policy extended to that year. Countering that expense will be a potential tax credit by which a family of four that has an income of less than $88,000 will receive tax credits to help pay insurance premiums and deductibles. At the same time, people at the other end of the economic spectrum will be given a new burden. Those families that report an income of more than $250,000 per year will have to pay more in the form of a Medicare payroll tax; their unearned income will be subject to an additional 3.8-percent tax.

As you know, in the past some of my colleagues advised individuals and small businesses to purchase health savings accounts (HSAs). The new law will have an immediate effect on people that took that advice. It will exclude a currently accepted practice, in which the costs of over-the-counter drugs not prescribed by a doctor were reimbursed on a tax-free basis. The law will increase the penalties for inappropriate distributions from HSAs, also; that is, for withdrawals that are not used for qualified medical expenses. But, to the best of my knowledge, none of my friends were using their HSAs for unqualified expenses.

So, what does this mean to the people of Missouri today? At this specific point in time, very little seems to be happening that has a direct immediate impact on most readers of this blog. The fines and penalties that might become associated with an independent attitude won’t kick in for another few years. But a lot more will happen in other aspects of the health care arena by that time. They say that the true art and science of economics involves an understanding of the changes that occur at the margin, and we need to look at all the little bitty changes, one at a time, to see how they fit. So far, and from this single perspective, these marginal changes are quite minimal. But this is just the beginning. Going through the health care bill section by section during the next few weeks will give us a better idea of what it is really all about.

The post What Does the Patient Protection Act Do to the Average Missourian Today? appeared first on Show-Me Institute.

The signing of the bill has not ended the debate. In fact, it may only be the beginning. House Republicans have already begun fighting the bill, and some have suggested that the Supreme Court may overturn the bill because it violates constitutional provisions. Dave Roland, a Show-Me Institute policy analyst, has written about the potential legal pitfalls that may be faced by the requirement to purchase health insurance.

More information about the final provisions of the bill will undoubtedly become available to the public in the coming days, so that we may better grasp what exactly the bill entails. However, it may well be shot down before it is scheduled to take effect in 2014. We have three years to really understand the changes this legislation will bring.

As Harvard economics professor Jeffrey Miron pointed out at his Obamanomics lecture last week, such intense conflict could be a good thing for the American people. This butting of heads can lead to gridlock, which can help prevent either side from getting everything it wants. Taking into consideration all of the debate and conflict initiated by the bill so far, it may look completely different by the time 2014 rolls around.

The post You Have Three Years to Understand the New Health Care Act appeared first on Show-Me Institute.

S.B. 618 would require insurance plans to cover up to $55,000 annually for autism diagnosis and treatment for children up to the age of 21. A mandate of any amount increases health insurance costs, and the bill’s substantial commitment would assuredly have a noticeable effect. Its proponents argue that it would increase the price of health care premiums by less than 1 percent, while insurers believe it could raise premiums up to 3 or 4 percent. Although the bill would exclude small businesses if it raised their premiums by more than 5 percent, any increase would necessarily price some marginal number of people and companies out of the insurance market, forcing them to cut coverage or reduce hiring.

Autism is a problem in Missouri, and it is not difficult to be swept up by the heart-wrenching stories of families with autistic children. But there are many disorders and diseases that afflict people — children and adults alike — and mandated coverage of all or even most of these problems would make insurance prohibitively expensive. These kinds of mandated coverage makes insurance more expensive especially for those with diseases that are not given state protection.

It’s important to note that some forms of autism aid already exist. Although not as comprehensive as an insurance mandate, there are publicly and privately funded resources for Missouri children with autism spectrum disorders, including Medicaid waivers for families who would not otherwise qualify for assistance, and a nonprofit private school for children with severe autism.

A large part of the argument in favor of the mandate lies in the unpredictability of health insurance when it is attached to employment — a problem only exacerbated by the current economic climate — and the difficulties involved in obtaining a plan that covers autism. Instead of government-imposed mandates about coverage, families should be free to choose an insurance plan that best fits their needs. Politicians cannot know the optimal equilibrium point between price, risk, and security for any type of insurance coverage, let alone for autism, because that equilibrium will differ for everyone.

The bill in question adds a much-needed amendment allowing Missourians to purchase out-of-state insurance that does not mandate autism coverage, although Missouri already has a mechanism that would help all families find affordable health insurance. Health savings accounts (HSAs) allow policyholders to become consumers, giving them the power to choose an appropriate coverage level. HSAs are portable, and therefore less dependent on job stability that may not always be available in an uncertain economic climate. Both employers and employees can contribute pretax funds to HSAs, which can then be used toward paying most basic health expenses. With an HSA and an accompanying high-deductible plan, consumers can budget their health care expenditures more effectively than bureaucratic cost-cutting is able to do.

State mandates raise health insurance costs across the board, and decrease people’s access to affordable coverage. In the long run, the most effective solution for families with autistic children — or any other disorder — is to open the insurance market to further competition, giving them a practical economic incentive to cater to such niche markets. Small businesses — at any point, but especially during a recession — are extremely cost-sensitive to changes in premiums like the one that would assuredly occur following a large mandate on autism treatment and diagnosis. Although this insurance mandate aims to help families with autistic children, it would simultaneously hurt another group of Missourians who would face significant cost increases, or even the potential loss of their own health insurance coverage.

The post The Autism Bill: Negative Outcomes From Good Intentions appeared first on Show-Me Institute.

About one in 100 children are diagnosed with some form of autism, studies have shown.

The bills’ sponsors, Sen. Scott Rupp, R-Wentzville, and Rep. Dwight Scharnhorst, R-St. Louis County, want to make sure families can get coverage for expensive therapy known as Applied Behavioral Analysis, which often involves 20 to 40 hours a week of one-on-one sessions with therapists.

As filed, the bills would require insurance policies to cover $72,000 a year in treatment for children and adults up to age 21.

There is absolutely nothing wrong with buying insurance to cover treatments for autism, but not everyone needs or wants this insurance, so they should not have to pay for it. For example, as I read the article, a family of four would be forced to continue paying for this insurance even if neither of their children showed any signs of autism. Not everyone requires the same kind of medical coverage, but by mandating that everyone buy similar high-end insurance policies, the only thing we ensure is higher prices for everyone.

The post Why Insurance Is So Expensive appeared first on Show-Me Institute.