Health Insurance Regulatory Crisis
By Arnold Kling
In the past 30 years, state governments have instituted more than 1,500 mandated benefits. According to the Council for Affordable Health Insurance, these mandates have increased the cost of individual health insurance by as much as 45 percent in some markets. Some people may not want or need health insurance coverage for drug abuse treatment, hair pieces, or acupuncture — but if the state they live in mandates it, they can only buy policies with that coverage.
You cannot get the benefit of a market if the state defines the product. Moreover, states often mandate the terms of competition–in some states it is illegal for a health insurance company to “discriminate” on the basis of risk, other than using age or some other broad category.
Of course, if the main argument in Crisis of Abundance is correct, then reducing the cost of the insurance process per se will not make health insurance affordable. I argue that the main issue is the large number of expensive procedures that we undergo, often without regard to cost-effectiveness.