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A question about health insurance regulation

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Caleb
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I have heard people say that one of the reasons that health insurance is so expensive is because it is highly regulated, but they never give specific examples of how it is highly regulated by the government. The only thing that I have heard is that you aren't allowed to buy across stane lines. Do you know of any other government regulations that cause health insurance to be so expensive?

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I have heard people say that one of the reasons that health insurance is so expensive is because it is highly regulated, but they never give specific examples of how it is highly regulated by the government. The only thing that I have heard is that you aren't allowed to buy across stane lines. Do you know of any other government regulations that cause health insurance to be so expensive?

Medicare, Medicaide, FDA.

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I have heard people say that one of the reasons that health insurance is so expensive is because it is highly regulated, but they never give specific examples of how it is highly regulated by the government. The only thing that I have heard is that you aren't allowed to buy across stane lines. Do you know of any other government regulations that cause health insurance to be so expensive?

Probably the largest contributors to high health costs as a result of regulation is the inability to buy insurance from whomever you wish regardless of what state they are authorized to do business in, and the mandates required by state insurance boards. For example, I can't buy a policy without paying for coverage on psychological illnesses because my state has required all insurers to provide that coverage, regardless of the policy sold. Since insurers are forced to provide this coverage, they pass that cost on to me. More and more mandates, higher and higher costs.

Another significant contributor to high health costs as a result of regulation is the fact that you must be licensed by the state in order to provide health care. Many things could be done by a nurse (and often are, as long as the doc makes an appearance), but the state requires a doctor to do them - or at least attend. Since the cost is higher, the insurance to cover it is higher.

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Can you be more specific on how those programs affect premiums?

Medicaide and Medicare reduce the number of participants via voluntary insurance offerings, thus spreading the cost among a smaller pool. They also shift the premiums to a less efficient (government) manager of the funds involved.

FDA sets up roadblocks to bringing potential new products to market.

In short, since the government has gotten involved in health care back in the 50's, like the education system or anything else they get involved with, efficiency is tossed out the window, and the end product has been defective. (Why Johnny can't think, read, . . .) Look to Canada, the U.K. and anywhere else that has heavy government involvement in health care to see what the US has to look forward to if it too adopts such draconian measures.

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Jeffs answered the question, but my main argument against the way you question is framed would be to point out that Americans aren't paying more than they wish to pay for healthcare, Barack Obama is the one who thinks they're paying too much.

Health insurance can't be "so expensive", if most Americans are willing and able to pay for it. In other countries healthcare costs less because people are getting a lot less healthcare. (not necessarily because they want less, but because it's not up to them, it's up to politicians who have other priorities)

So sure, healthcare would be less expensive without the multitude of regulations and subsidies, but that would likely translate into Americans (on average) buying more healthcare, not paying less for it. The amount Americans are spending on healthcare is not "too much", as Obama puts it. He just happens to have different priorities, and in a free country he could take all the money he made from community organizing, and invest it in those priorities.

Edited by Jake_Ellison
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Another reason health insurance costs so much is that medical facilites, services, and products cost so much and keep rising in cost. The government, via medicare and medicade, have been pouring an ever increacing quantity of money every year for over 40 years, driving the costs in that area up dramatically yearly. Insurance just tries to spread its costs of providing medical services to its policy holders over all of its premiums. The costs the insurance company has to pay have to be reflected in its premiums. It is a pay as you go system, that is, the payments the company makes a year have to be covered by the premiums it collects that year. You sometimes hear someone say that they have been paying premiums for so many years, implying that they should be entitled to something. They are admitting that they do not know how insurance works.

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Can you be more specific on how those programs affect premiums?
Jeff pointed to two things: the fact that people are forced to buy much more coverage than they would voluntarily, and also licensing requirements.

In addition, tax law pushes companies to provide health-care, by allowing companies to do so more cheaply than individuals (because of tax-breaks). This has removed the incentive to save from the people who are most able to make decisions that will save money (i.e. the individual).

Tied in to licensing are immigration laws. The doctors have a strong union (the "AMA") which lobbies hard to restrict the immigration of doctors into the U.S. There are special visa categories, with special rules, for doctors and nurses. In general, people in these professions have to jump through a few extra hoops to get permanent residency. I personally know 4 doctors who were practicing abroad, but switch careers here, because of immigration issues.

Another factor adding to costs is that the government forces certain hospitals to treat patients who arrive at Emergency Rooms, even though they might have nothing more than a cough and cold, and even though they express an inability to pay. As a result, the hospitals pass these costs on to paying patients.

In spite of all this, for most people who matter (i.e. those who're paying their way directly or indirectly) the health-care system in the U.S. is top-notch.

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Health care costs are higher than they otherwise would be based on competition restriction and regulatory mandates (state and federal). Those are the two specific forces of government that obviously effect costs. Health insurance simply does not exist in anything even barely resembling a free market.

Here are a few more specifics:

Quote from:
The Effect of State Regulations on Health Insurance Premiums

Study Referenced:
State Health Insurance Regulations and the Price of High-Deductible Policies PDF

(1) mandated health benefits, which require insurers to cover particular treatments or particular services;

(2) "any willing provider" laws, which restrict insurers' ability to exclude hospitals and doctors from their networks;

(3) community rating laws, which require insurers to limit premium differences across individuals; and

(4) guaranteed issue laws, which require insurers to sell insurance to all potential customers regardless of health or pre-existing conditions.

The authors found that each of these four types of regulations results in statistically significant increases in health insurance premiums. The findings were consistent across both the eHealthInsurance.com and Golden Rule datasets. The authors estimated that eliminating all of these regulations could save individuals up to $2,000 per year in insurance premiums.

As for federal regulations, I believe all providers are forced to be in regulatory compliance with everything contained within:

The Health Insurance Portability and Accountability Act (HIPPAA)

The Mental Health Parity Act

Some of HIPPA requirements -
Link

1- Limit the use of pre-existing condition restrictions to a maximum of twelve months

2- Offer a special enrollment period to employees and dependents who do not enroll in the plan when initially eligible because they have other coverage, and who subsequently lose that coverage

3- Eliminate discrimination against participants and beneficiaries based on HEALTH STATUS

4- Provide a minimum level of hospital coverage for newborns and mothers, generally 48 hours to 96 hours (cesarean birth)

5- Provide parity in mental health benefits, that is, any dollar limitation applied to mental health treatment cannot be lower than those on medical and surgical benefits

Another reason health care costs (and therefore insurance coverage costs) go up is because of innovation and discovery. Medicine is an evolving field where new technologies, tests, drugs, etc are constantly being invented and brought to market. When you add up health care costs overall, you're adding up the costs of all health care related services. As new services are offered, they're added into that total cost. Of course, this is a good thing.

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I think everyone is hitting on all the major points here, but we've missed a small but important factor in rising health care costs: insurance premiums paid by hospitals and doctors. Many service providers pay exorbitant rates for insurance, depending on location, which all comes out of the consumers pocket--if the provider can even stay in business. This topic was brought up a few months ago under the title 'Malpractice Reform'.

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Every tax, duty, fee etc that is levied by government gets passed along, so items like electricity & heating and cooling costs as well as all kinds of ordinary items from toilet paper in the washrooms to computers, pens & paper used by hospital staff all cost more because of unnecessary costs forced on everyone by government.

Add the regular increase caused by taxes et al to the special legislation aimed only at the medical profession and you get the answer of why the costs are really high in health care.

The entire tax system is legalized theft. The sooner it is dismantled the better.

Edited by AllMenAreIslands
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I think another thing that contributes to rising insurance costs, is because of laws that mandate businesses provided health insurance for certain people. It just gives insurance companies more power. When businesses don't have to abide by regulations, they have to go through unions if they don't want to provide coverage. Theoretically, if more people relied on themselves to buy health insurance, then insurance companies would not have as much power over us.

Just a thought

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