I hate it when my pet theories don’t work out. But in the cause of evidence-based punditry, I re-evaluate my thinking in light of the latest information available. The latest data compelling an attitude adjustment on my part is a report from the state Bureau of Insurance detailing the pitiful market performance of “mandate-lite” insurance policies.
In 2009 the General Assembly passed legislation allowing insurance companies in Virginia to sell “basic health insurance coverage” to small employers in Virginia. The hope was that exempting these insurance plans from most of Virginia’s mandated health benefits would make medical insurance coverage more affordable and accessible — an idea that I have endorsed for a long time. Displaying extraordinary foresight for a government body, the Assembly asked the Bureau of Insurance to report back on how the idea was working.
Well, the results aren’t anything to write home about. In fact, they’re pitiful. In the report just released, the Bureau of Insurance surveyed 33 insurance carriers offering coverage in the small employer market. Of those, only four had approved mandate-lite plans. As of March 2001, only one insurer had actually sold a mandate-lite plan, and that was to a mere three groups covering 10 employees. That carrier ended sales on July 1, 2011. A second carrier, having sold not a single plan, said that it will stop marketing them as well.
In other words, “mandates lite” has been a total bust.
Some readers of this blog will chortle with satisfaction at the idea that this timid step toward a more free-market approach in health insurance is such an obvious failure. This is proof, they will likely argue, that more government intervention in the insurance marketplace is the solution. They may be proven right, but it’s too early to jump to conclusions.
The passage last year of the Patient Protection and Affordable Care Act, otherwise known as Obamacare, likely undercut the market for the insurance policies. As the Bureau of Insurance report concludes, “The potential conflict between federal legislation and subsequent regulations with current state legislation is a deterrent to the development of mandate-lite plans at this time.”
The federal law requires the states to set up health insurance exchanges by 2013 to provide coverage for those who can’t get it from their employer. The legislation requires “essential benefits” that include hospitalization, ambulatory care, emergency services, maternity and newborn care, mental health and substance-abuse, prescription drugs, rehab, laboratory services, preventive and chronic-disease-management, and pediatric services including oral and vision care.
In 2013, in other words, federal insurance requirements will trump state law, putting the “mandate lite” insurance products out of business. I would conjecture that Virginia insurance carriers concluded that there is no point in investing resources into developing the “mandate lite” market knowing that it is scheduled for extinction. What we don’t know is why the preliminary experience was so disappointing. Was it due to a lack of demand… or a reluctance of insurance carriers, seeing Obamacare coming down the line, to invest meaningful resources? It’s too bad the Bureau of Insurance report didn’t address that question.
Here’s one thing we do know: Obamacare has extinguished any competing vision in Virginia for how health insurance should operate. Marketplace experimentation will cease. Lawmakers, regulators and the special interests who influence them will make the decisions for us.
