Lessons from California on the insurance mandate
Insurance Mandates Don’t Work
By Jamie Court
The Washington Post
September 21, 2009
A cornerstone of President Obama’s health-care plan is, as he said in his speech to Congress, “individuals will be required to carry basic insurance, just like most states require you to carry auto insurance.” But the tarnished history of such laws shows that making insurance mandatory, and even making it more affordable, does not compel the uninsured to buy it.
In California, the car capital of America, the injustice of mandatory insurance laws sparked one of the great voter revolts of modern history — and that still didn’t solve the uninsured motorist problem. In 1988, the people of California passed Proposition 103, which required auto insurance companies to seek permission through an elected insurance commissioner for premium increases. It created an intervener system that allows members of the public to challenge unnecessary premium hikes. The law also made auto insurance pricing fairer in various ways, including banning ZIP-code based auto insurance.
The Consumer Federation of American reported in 2008 that Proposition 103 had saved Californians $62 billion on their auto insurance. The market is competitive, prices are down, and the number of uninsured motorists has decreased some from pre-Prop 103 levels. Yet in the most competitive auto insurance market in the nation, the uninsured motorist rate is still 18 percent, among the highest. That’s true even after California took more punitive measures against uninsured motorists. Stiffer fines, the impounding of cars and the loss of legal rights for uninsured motorist have not significantly impacted the uninsured motorist rate.
http://www.washingtonpost.com/wp-dyn/content/article/2009/09/21/AR2009092103250.html
Comment:
By Don McCanne, MD
The health care reform proposal before Congress would increase regulatory oversight of the private insurers, mandate individuals to purchase their plans, and penalize those who fail to do so. The experience with auto insurance in California should provide us with at least a hint as to whether that is a rational response to the health care crisis.
True, auto insurance and health insurance are not the same thing, but the mandate to purchase either type of insurance applies to the same individuals. Why should we expect a change in behavior merely because the unaffordable insurance product is designed to protect the individual’s health? Even with the proposed subsidies, a very large number of individuals will not have enough funds to pay the premiums and will remain uninsured.
California’s mandate to purchase more highly regulated auto insurance was a success, at least according to the incrementalists. The insurance market is more competitive, the number of uninsured has decreased, and Californians saved $62 billion on their premiums. The fact that 18 percent of California motorists are still uninsured is merely a technical parameter that we’ll work on later.
Come on! We can get it right! We can establish a separate health care risk pool and fund it equitably through the tax system based on ability to pay, and we can provide automatic enrollment for everyone.
We must achieve reform. The last thing that we want to do is to defeat the current proposal and then walk away with nothing. But it is even more imperative for us to reject the current proposal and immediately move forward with reform that will provide affordable care for all of us.
Frankly, I’m sick and tired of listening to those who say that PNHP needs to get on board and support the public option, which is really saying that we need to support an individual mandate to purchase unaffordable plans. Those of you who were duped into supporting this model that can’t possibly work need to abandon that ship and get on board with us and our colleagues who will accept nothing less than health care justice for all.