(03/22/05) There’s a lot of discussion in Montpelier about our broken health care system.  Based on press reports, it looks like effort is being directed at improving the process and delivery with the ultimate goal of achieving equity in health coverage for everyone.

While the details will take a while to be worked out, a look at our current health policies will show that most government initiatives have had catastrophic consequences.

If the legislature really wants to improve health coverage in Vermont, eliminate guaranteed issue.  This mandate was implemented in the early 1990’s and it requires insurance companies to underwrite a policy for anyone, regardless of health.  Sounds good but it’s like buying fire insurance coverage when you see smoke coming through the roof of a home.

Guaranteed Issue (GI) motivates people not to buy health insurance until they have a health problem and the healthy are motivated to defer insurance until the last minute.  This makes health insurance unaffordable since there is no sharing of risk with healthy people in an insurance pool and for those who are sick, their premiums are very high.  This has destroyed the health insurance market in Vermont and that’s why GI should be repealed.

States that have GI all have similar problems with insurance costs.  Like in Vermont, insurance carriers abandon those markets and consumers have no choice in obtaining coverage.  The state of Washington drove carriers away because of GI and it wasn’t until New Hampshire repealed the law a few years ago that consumers were given better insurance options in the market.

The only thing guaranteed with GI is a higher premium.  For example, a family of 4 with a high health insurance deductible now pays $300 in NH compared to $771 in Vermont for the same coverage.  The Kaiser Family Foundation’s national survey of employer sponsored insurance plans concluded the cost of insurance was 11 percent higher in states with guaranteed issue requirements.  Industry representatives say it’s higher.

According to an auto dealer ad on in Chittenden County, it’s cheaper on a monthly basis for a Vermonter to lease 3 Chrysler Town & Country mini-vans than it is to purchase a family health insurance plan.  That’s one of the reasons the Kaiser Foundation found more people are on a state health plan called Medicaid in states with guaranteed issue than states without.  In Vermont, about 25 percent of our population is covered by Medicaid, the 2nd largest percent in the country with an $80M deficit projected next fiscal year.

There are ways to promote access to health insurance.  New Hampshire reduced mandates to make coverage more affordable and now allows consumers to purchase basic bare bones coverage with a high deductible.  Another way would be to allow consumers to purchase insurance from another state like in Kansas where a basic high deductible policy for a family of 4 is $172 a month.

However, people with severe medical problems do need affordable health coverage.  Currently, over 30 states have a high risk pool that allows people to buy a policy at 25 to 50 percent above the average premium.  Even at that rate, it’s not as high as the cost of guaranteed issue.  States that have adopted this approach have lower uninsured and dependence on Medicaid and more people are covered by private insurance.  We could also means test the premium and give grants to the truly needy to help defray the costs.
 
The past records of government insurance mandates and guaranteed issue meant to help do more harm.  Rather than adopting major unproven financial initiatives to solve the problem, Vermonters should follow the proven record by repealing guaranteed issue and enacting a high risk pool.  Success has no rules, but you can learn a lot from failure.

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Frank Mazur is a small business owner and formerly served in the Vermont House for five terms. He can be reached at 658-3975 (home) or via e-mail.

Frank Mazur
South Burlington