In the mass of verbiage about the Schwarzenegger plan, you can find the odd interesting nugget. David Henderson from Hoover—writing in that bastion of reasoned clarity, the editorial section of the WSJ—admits that the impact of state mandated benefits on the costs of insurance aren’t that great.

It is important, though, not to overstate its benefits. The gain to Californians from abolishing these mandates would not be huge. CAHI compiled data from America’s Health Insurance plan (SIC—I assume he means AHIP the health plans trade group) and eHealthInsurance for the individual market and from the federal government for the small-group market and found that in 2003, although California had more mandated coverages than all but six other states, it had among the lowest insurance rates for individual health insurance policies ($1,885 versus a top rate of $6,048 for New Jersey.)

OK, so in the rest of his article he’s slagging off Arnie-care but in that part he gets it at least factually correct. That is in contrast to plenty of others who should know better, including Larry Glasscock the CEO of Wellpoint. Here’s what he said about the matter in an interview I’ve already derided:

John, while the Massachusetts plan represents a step forward in trying to find solutions for the uninsured, I have several concerns about its individual mandate. Under the new law, individuals are only required to obtain coverage if it is "affordable" for them. But the Massachusetts law, as I understand it, preserved all of the commonwealth’s existing benefit mandates, so it is difficult to see how health insurance coverage under the new program will be any more affordable once the mandate to purchase coverage becomes effective than it is today.

It’s obvious that the relatively few, though much attacked, state-mandated benefits—such as wigs for chemotherapy patients—only add a small proportion to the overall cost of health care. And because of the bizarre, but set in stone, ERISA law which prevents all state regulation of benefits for self-insured corporations, state-level mandates only apply to small businesses and individual fully-insured plans. Yet they are cited time after time as being the draconian regulations that if only small businesses and individuals could get out from underneath of, well then a Federally-regulated “association health plan” (or whatever they’re being called these days) could provide insurance plans at a rate so cheap that everyone could buy one. And the of course uninsurance would disappear.

Henderson, though, uncovers the uncomfortable “fact” that despite all those state mandates, Californian insurance rates are incredibly cheap compared to other states—or at least are in the survey he discovered (again one much derided on THCB). Of course it is state regulations that make insurance expensive in New Jersey and Massachusetts and cheap, for some people, in California. But that’s got nothing to do with benefit mandates about types of care that are covered—it’s because of the way the structure of insurance is regulated. In those expensive states community rating, guaranteed issue and the like is mandated. That cheap California coverage is only for healthy people in high deductible plans. So the argument that getting rid of state mandates for particular types of benefits would enable small businesses and individuals to buy low cost insurance is rubbish. It’s getting rid of community rating that would do it, and then of course only for the healthy people who would be attractive to purveyors of underwritten insurance.

And of course if you go down Henderson’s line you’d abolish community rating, and put everyone in the individual market with voluntary grouping—which would emerge around health status. Take that to its logical extension (which I’m afraid both the loony and the sensible libertarians are loathe to do) and you end up with a bunch of plans competing to insure the healthy people who don’t really need coverage, and a bunch of sick people who can’t get it at all. After all if the “pool” is made up of people paying $1,885 a year, and average expenditure is over $6,000 a year, then by definition that pool is not going to be able to cover the people for whom costs are above the average. Which is of course the point.

So getting to universal “coverage” by getting everyone into a high-deductible plan will leave someone else (the taxpayer, the provider or the patient) picking up the tab. Which is why Schwarzenegger and Romney’s non-explicit reliance on them is doomed to failure.

And it’s incredibly ironic that those on the libertarian right, who don’t believe in compulsory universal insurance of any kind, don’t seem to have noticed one tiny little thing. The states which allow underwriting, like Texas and California, have much higher rates of uninsurance than those like Massachusetts and New Jersey that ban it. So how extending the ability of insurers to sell underwritten insurance products in those states is supposed to reduce uninsurance overall, I’m just not sure.

You’d think the LA Times’s Lisa Girion would have had the human decency to stop beating up the health insurance industry. It’s getting close to the time when the referee should step in to save the insurers from further punishment. But oh no, it’s haymakers landing on the chin time after time.

This time she uncovers another little nuance about why the individual insurance market is such a disaster—entire classifications of occupations are automatically disqualified. Good article, go read it.

I’m reminded of two things. One, back in 1991 Mary Ann O’Sullivan then (I think) of Health Access gave a speech in which she described exactly the same thing. She quoted one insurer denying used car salesmen insurance because “you just can’t trust those people!”

Two, I paraglide, and on the paragliding list in a discussion about how to make sure that your health insurance covered paragliding we got a beautifully naive question from a recent immigrant from (I think) Hungary where the national paragliding association groups together and buys health insurance for its members. He suggested that the US national association did the same thing as the Hungarians! Some of us on the list suggested that this might not be the best way to go about finding affordable insurance.