How a High Health Insurance Deductible Negates Most Mandated Coverages

Among those who recognize that the elimination of Obamacare does nothing to fix the very real problems with the status quo that existed and were growing long before Obama’s election, state mandated coverages often are one topic in the search for a cure to what is wrong with healthcare in America.  Their presence has steadily grown over the years finding too little resistance in most state legislatures.  The total number of mandates in all the states as of the end of 2011 was 2262 according to a report by The Council for Affordable Health Insurance.  This is up from a total of about 850 in 1992, the first year the organization began tracking them.  Yet focus on rolling back these regulations may be  effort that could better be spent elsewhere in the promotion of high deductible insurance that in itself negates most coverage mandates, especially the most questionable among them, and resolves other problems as well.

Coverage mandates especially draw attention of free market reformers due to the ones that simply make no sense.  Some states require such dubious things as marriage counseling, massage therapy, hair transplants, in vitro fertilization, smoking cessation, and a host of other conditions to be included in every policy written.  When mixed into the same soup with low or non-existent deductibles and small copays this becomes a recipe for trouble, eliminating all constraints on use of services many would argue should not even be categorized as health care in the first place, yet these payouts must be baked into everyone’s premium.  In this sense, the “coverage” is truly an illusion as the appearance of free exists only for the user who probably has not considered that this necessarily means the unconstrained use of everyone else is then their bill to pay.  Nothing is gained in such arrangements and in fact much is lost both in overuse and the provider and third-party payer’s expense in effecting the transactions rather than simply taking direct payment from the user at the time of service.

None of this is to suggest there are not mandated coverages that would escape negation by a high deductible and it is these situations that should receive the focus of attempts to attack the mandated coverage problem.  The most onerous of the bunch are community rating across all age groups and guaranteed issue which alone have destroyed the market for individual insurance in several states and are a topic for another discussion.

Of specific procedure coverage mandates it is only those that require first dollar coverage or supersede the deductible and perhaps then only require very small copays that escape the negation of a high deductible and need attention.  All others can be ignored and may even serve a useful purpose by providing an incentive to move to high deductible insurance as it becomes even less expensive in relative terms to its low deductible counterpart that must include the incentivized overuse in its premiums.

With a properly high deductible the situation changes markedly.  A large majority of people with a high deductible never have to file a claim in any given year.  This means that most services are paid directly and not by others.  This puts a cap on waste and the discussion changes from if a particular service is covered and then overused with payment by others to if a particular covered service counts toward a deductible that will most likely never be reached, and thereby eliminates the requirement to include such costs in the premium.  This fact explains why high deductible insurance can be priced so much cheaper than that with low or non-existent deductibles.

Another benefit of a high deductible is its effect to contain the high cost of defensive medicine as questions of necessity are much more likely to be asked by those spending their own money before using that of others.  Providers will still have an interest in protecting themselves but can do that and curb use by having patients sign off on declined tests and procedures after discussing the benefits and risks.  Unnecessary third-party payment demonstrably is the poison to a functioning free market in health care, and it’s elimination must always be central in the path to true reform.

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