With implementation of the Affordable Care Act now in full swing, more and more people are discovering that they cannot buy health insurance comparable to what they previously had - or not at a comparable price. One culprit is a mandate in the ACA that all health insurance must cover "essential health benefits," whether the customer wants all of this coverage or not. To add insult to injury, the government's own analysis counts this reduction in consumer choice as a benefit rather than a cost!
For more than three decades, presidents issued executive orders telling federal agencies to conduct "regulatory impact analysis" to assess the likely effects of major proposed regulations. Yet the Department of Health and Human Services (HHS) analysis accompanying the regulation that implements the ACA's essential health benefits mandate reads like an advocacy piece written to support the regulation. This is a predictable result when an administration wants to implement a mandate at top speed. To promote objectivity, the law should require regulatory impact analysis, and the analysis should be subject to judicial review.
The regulation on essential health benefits is a prime example of why such regulatory reform is needed. In its analysis accompanying this regulation, HHS cites three studies that find health insurance contracts to be so complicated that consumers have trouble understanding them. The logical solution, according to HHS, is to take away a lot of choices by requiring consumers to buy coverage they may not want.
As a result, teetotalers must belly up to the bar to pay for substance abuse treatment coverage - and I don't think that means caffeine. Gay men may be unhappy to learn that their premiums are now higher to cover the costs of pregnancy and birth. Empty nesters must spend some of their nest egg on pediatric dental coverage. And people who rationally decided that mental health coverage wasn't worth the cost to them must now buy it anyway.
But there's one silver lining: mandated coverage of preventive care means colonoscopies for all! That's an appropriate metaphor for the "essential health benefits" mandate, since it violates our privacy and cleans out our wallets at the same time.
Health insurers are telling at least 146,000 Michiganders that their policies will be discontinued because they do not meet the "essential health benefits" requirements. About 130,000 Blue Cross customers in North Carolina will either face large premium increases or also see their plans dropped. A 60-year-old retired schoolteacher who will pay $1,800 more annually for an individual policy told the San Jose Mercury News, "Of course, I want people to have health care. I just didn't realize I was going to be the one who was going to pay for it personally."
The package of "essential health benefits" offered in each state is supposed to reflect the services and limits in a "typical employer plan" in that state. The regulatory impact analysis accompanying the regulation actually claims that "(a)lignment with current consumer and employer choices" is a "benefit" of the regulation. But the mandate is clearly not a benefit for consumers who may not want all the coverage that a "typical employer plan" offers.
Indeed, using an employer-provided plan as the model virtually guarantees that many premium dollars will be spent on things a lot of consumers would not choose to pay for.
Employer-provided health insurance is purchased with pre-tax dollars. For a middle-income worker, federal, state and payroll taxes easily total more than 30 percent. Therefore, a tax-free, employer-provided health care plan can spend 30 percent of the premium on coverage the worker deems a waste and still be as valuable to the worker as receiving taxable cash.
Thus, saying that everyone's "basic" health plan must be as good as an employer-provided plan builds a substantial amount of waste into the health care system by design. HHS made no effort to calculate this cost. It acknowledged that expanding coverage could lead to some excessive utilization of services, but the analysis was simply not thorough enough to conclude whether consumers were better or worse off on net.
Given the current high-decibel legislative debate over "Obamacare," some objective information about the effects of the essential health services mandate could be just what the doctor ordered. But the current regulatory process produces no such elixir. The only way we'll see more objective regulatory analysis is if Congress prescribes it by reforming the regulatory process.