Saturday, July 31, 2010

Minimum Insurance laws and the Uninsured

Although not universally agreed upon, a strong theoretical and empirical connection exists between a legally mandated minimum wage and the rate of unemployment:

When the minimum wage that is legally-allowed increases, so does the number of unemployed.1, 2, 3

A similar cause-and-effect relationship exists between insurance mandates and the uninsured. Understanding the effect of "minimum insurance laws" is complicated by the fact that different mandates have different cost consequences, and each state has its unique mix of mandates. There are four main types of health insurance mandates: benefit mandates (which are not cost equivalent across benefit types), community rating,guaranteed issue7, and mandatory insurance. Each of these categories will increase the cost of insurance, but to different degrees. Insurance mandates all raise the price of obtaining insurance, which in turn increases the number of people unable or unwilling to pay the premiums:

When the minimum insurance that is legally-allowed increases, so does the number of uninsured.4,5,6

1. Mythology of the Minimum Wage http://mises.org/story/2130
2. Minimum Wages and Employment
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=961374
3. Minimum Wages
http://www.econlib.org/library/Enc/MinimumWages.html
4. Health Insurance Mandates in the States 2008
http://www.cahi.org/cahi_contents/resources/pdf/HealthInsuranceMandates2008.pdf
5. Mandated Health Insurance Benefits: Tradeoffs Among Benefits, Coverage and Costs?
http://www.kff.org/insurance/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=13995
6. The effect of State regulations on Health Insurance Premiums: A Revised Analysis
http://www.heritage.org/research/healthcare/cda06-04.cfm
7. Impact of Guaranteed Issue and Community Rating Reforms on Individual Insurance Markets, 2007
http://www.ahip.org/content/pressrelease.aspx?docid=20794

Previously posted on Wealth is Not the Problem 1/28/10 and on Sermo 4/25/10 (a physician-only online network.)

No comments:

Post a Comment