Amy Traub

Manhattan Institute: Junk Insurance Policies Would be Cheaper

A couple of weeks ago, I pointed out the flaws in a recent Manhattan Institute policy bulletin which argued against regulating sky-high health insurance rates even though their own numbers showed such regulation has been effective at keeping rates down in the past. In that bulletin, the Manhattan Institute claimed that high insurance rates shouldn't be addressed directly because they are merely a symptom of an underlying disease -- a "disease" of having too many requirements about the kind of care insurance companies have to cover. These requirements, they contend, are what's really pushing up the cost of health insurance in New York. According to the Manhattan Institute, if we could just get rid of these pesky rules, and allow insurance companies to be more "flexible" about what plans they offer, cheaper policies would be available.

Surprise! For once, I think the Manhattan Institute is right. Over the last thirty years, New York State has passed a variety of laws requiring all health insurance plans to cover things like mammograms, diabetes equipment, cancer drugs, and getting a second medical opinion before undergoing surgery. If we got rid of these requirements, and allowed health insurers to offer plans that cover as few life-saving medical treatments as they choose, they might indeed offer cheaper insurance plans -- plans that would be cheaper because they provide less coverage of needed medical care.

But these junk insurance policies aren't what New Yorkers want or need. New York needs quality, affordable health insurance, not plans that, in the words of State Senator Liz Krueger, "might not cover almost anything we think of health insurance supposedly being there for." We can lower costs without sacrificing quality, if we reinstitute the public oversight New York used to have over health insurance rates -- exactly the solution the Manhattan Institute rejects.

Let's review the Manhattan Institute's argument: we shouldn't regulate the skyrocketing rates charged by a highly profitable industry for health care New Yorkers need to stay alive, even though such regulation has been shown to keep costs down. Instead, we should let insurance companies offer junk policies, which will be easier to afford.

I see how that agenda would make sense if you're a health insurer bent on maximizing profits. For the rest of us, it's simply a prescription for bad policy.

Amy Traub: Author Bio | Other Posts
Posted at 7:47 AM, Apr 11, 2006 in Health Care | Insurance Industry
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