"Democracy Again Is Being Tested"

By Bud Schauerte

Health insurance “mandates” are laws, enacted by all of the 50 state legislatures (plus U.S. Territories), which offer payment benefits for almost everything a patient might desire. They are referred to as “gold plated” and “Cadillac” insurance because they are both expensive and fully loaded with all conceivable options. 

Mandates cannot be stripped from a health insurance plan. Buy a health insurance policy in any state and you buy their mandates.

Some Members of the U.S. Congress, working to develop universal health insurance “reform,” would like to tax state insurance mandates out of existence. “Cadillac” health plans, they believe, are unnecessary, too expensive, and should be replaced with one-size-fits-all health insurance programs.

The Virginia-based Council for Affordable Health Insurance (CAHI) estimates that state mandated coverages boost premium costs 20% to 50% more than minimum coverage policies.

One federal health care “reform” proposal is to apply a 35% excise tax on state health plan mandates. The proposed tax, were it to become law, could  undermine a state’s law making authority over the insurance industry and put into question how both state and federal governments, simultaneously, would be responsible for insurance regulation.

Patients seem to appreciate the luxury of “gold plated” health plans, in spite of their high premium costs, because more and more mandates are being created. State legislators find it difficult to oppose any legislation which promises enhanced care to constituents plus stable and dependable fees for health care providers now able to claim insurance benefits for their compensation.

 What is more, legislators who sponsor health care mandates in state legislatures generally receive bountiful financial support from newly minted health care providers at reelection time. How reciprical.

A survey of states by the CAHI to date has counted 2,133 mandated health care coverages in all fifty states. Texas has 57 health care mandates.  Most mandates are fully functional health care services dominated by physicians and skilled professionals. Others have tacit  relationships to physical well-being and maintaining quality of life.

Here are some examples of uncommon health care mandates available in one or more states: marriage counseling, breast reduction and reconstruction, dietician counseling, hair prothesis (wigs), substance abuse therapy, acupuncture, hearing aids, contraception, speech pathology, autism, in vitro fertilization, bone mass measurement, HIV testing, diabetic supplies, dental anesthesia, ambulance service, and the list goes on and on.

Insurance is the last remaining vital industry, national in scope, essential to our free enterprise system and exclusively regulated by each of the 50 states and U.S. territories. It has been that way since 1945 when the U.S. Congress enacted the McCarran-Ferguson Act.

The insurance industry (life & health, property & casualty) is a consistent money maker for all the states. Premium taxes, fees and other revenues, derived from state regulation of insurance, amounts to more than $15.3 billion annually ($1.3 billion in Texas), according to the Insurance Information Institute. What is more, insurance company political campaign committees are known to have contributed mountains of dollars in support of reelections. (Members of Congress understand “mountains of dollars” and “reelections.”)

Members of Congress, who favor federal regulation of insurers, swoon at the dollar signs, dream of long careers in public office, and file legislative bills requiring the states to abdicate some of their regulatory authorities to the feds. A bill introduced in Congress last year, if enacted, would have allowed insurers to choose between state or federal regulation of their businesses.

Somehow, it is difficult to visualize a federal government health care program sharing regulatory control and, likely, premium tax revenues with 50 state legislatures. But maybe that’s just me.

For anyone who believes that Washington D.C. is less prepared or unwilling to assume regulatory control over the insurance industry, they should be reminded that the Feds already administer: The Social Security Administration, Medicare/Medicaid, the Federal Deposit Insurance Corporation (FDIC), the National Flood Insurance Program (NFIP), the Pension Benefit Guaranty Corporation, the Federal Crop Insurance Corporation (FCIC), the Federal Crime Insurance Program (FCIP), and getting set to control one-sixth of the U.S. economy through national health care.

The state regulated insurance industry is divided on the prospect of being regulated by the Feds. Large insurers, who do business in multiple states, generally favor federal government control. Smaller companies which do not market coast-to-coast mainly prefer to be controlled by multiple state insurance departments. They endorse the idea that individual state insurance departments more likely will understand the unique operating challenges of small insurers.

Mandated coverages embodied in state health care insurance policies, are huge obstacles to the design and development of national health insurance “reform” legislation.  Health insurance consumers want mandates. Members of Congress, who are writing new insurance “reform” rules, do not. This issue will not stay “pending.” A decision will come.

Democracy again is being tested.

Bud Schauerte is a free lance business writer with more than 30 years of insurance experience. He served as vice-president of a major Houston-based insurer prior to his appointment by President George Herbert Walker Bush as Federal Insurance Administrator.

Schauerte is a U.S. Air Force veteran. He holds baccalaureate and graduate degrees from the University of Missouri and resides in Austin.