When we buy car insurance or a homeowner’s policy, we usually have a choice of buying a standard bread-and-butter contract or paying more for extra coverage. Health insurance doesn’t necessarily work that way.
For example, a recent news story examined a new Connecticut law that required health insurers to cover fertility treatments, including multiple in-vitro fertilizations. That law limited benefits to women under age 40. Several interviewees argued that a cut-off of 40 was unjust, and that all insurance should cover treatments up to age 45 or older.
(I do not argue that infertility is a trivial issue or that its treatment is unimportant. The inability of a couple to have children can be enormously painful. This is just one example of the ways in which health coverage differs from other types of insurance.)
It is striking, however, that states do not require similar mandatory coverage in most car or home insurance policies. We do not require that all auto policies include collision and theft coverage nor indemnities in case an engine or transmission fails prematurely. People can, however, buy coverage for such risks if they want.
Similarly, we do not require that all homeowner’s policies automatically include coverage for high risks associated with trampolines or swimming pools or replacement of expensive personal property. Consumers who need such protection must pay extra for it.
Most states don’t allow health insurance to be sold in the same way. Many, like Connecticut, require that all health-care policies include coverage for specific conditions like infertility. Most also must reimburse mental-health or substance-abuse treatment at the same rate as physical ailments. Companies have some latitude about the details of coverage, but the government mandates broad sets of treatments.
Yes, insurers can offer “major medical” policies with high deductibles for all treatments. But they cannot offer full reimbursement for some diagnoses while arbitrarily excluding others.
Mandating coverage drives up the cost of health policies. In the Connecticut story, one infertility advocate argued that insurers can afford to pay mandated benefits out of existing profits without raising premiums. While this may be true for small changes in the short term, over the long term increases in health payouts eventually get passed along to consumers in the form of higher premiums.
Many households are insulated from higher health premiums because their insurance is obtained through the intermediary of an employer. Yes, employers can shop around for cheaper coverage, and they pass increasing portions of total coverage costs along to employees. And yes, if a household is willing to pay the entire bill itself, it certainly is free to look for a health policy that represents the best trade-off of price and covered services.
In practical terms, however, most people who get health coverage via employment get to choose between one or two options, unlike auto or home coverage, where they have many.
It is true that most states require auto insurance policies to include compensating others for harm caused by the insured vehicle. Moreover, one must now buy insurance in order to legally operate a vehicle almost anywhere.
The argument for this is that third parties can be harmed by use of a vehicle in ways they cannot be, say, through use of a house or by managing one’s own health. So government intervenes to reduce possible external costs.
One rejoinder to such comparisons is that people can control how they use vehicles, but for the most part, they cannot control when they get sick. You can choose to drive fast or slow but not whether to get appendicitis.
True, but there are many maladies over which consumers exercise some choice of treatment. Some depressed people see a therapist weekly, others a few times a year and many not at all. Many people have teeth extracted, but not all choose to get implants. Many have allergies, but not all get shots. Many are overweight but don’t opt for liposuction or stomach stapling.
The point of all of this is not that government mandates to cover certain procedures are bad. It is rather to point out that our health system has developed in such a way that there are some odd discrepancies between health insurance and other insurance.
States can ban exclusions of certain medical procedures, just as Minnesota banned insurer limitations on choice of auto glass repair shops. In both cases, however, the average customer pays a higher price.
Government-provided or single-payer coverage would shift costs to taxpayers. Even then, someone will have to decide which procedures are covered and which are not. There always are tradeoffs, even with necessities like health care. All that varies is who has to weigh them.
© 2005 Edward Lotterman
Chanarambie Consulting, Inc.