In April 2006, Massachusetts became the first state to require that all of its residents purchase health insurance. The plan had support from organizations and individuals across the political spectrum.  The Massachusetts plan was a response to today’s health care costs, which are rising twice as fast as inflation, making insurance increasingly unaffordable for many employers and individuals.   

Under the plan, the state would establish an authority known as the Commonwealth Health Insurance Connector (or “Connector”) to serve as a clearinghouse through which individuals would be able to purchase state-approved insurance plans. Every resident would be required to purchase a health insurance plan, either from a private insurer or though the Connector, with stiff financial penalties for those who failed to comply.

Residents who could not afford insurance would have their expenses subsidized by the state depending on their income. Employers with more than ten employees would be required to provide health insurance for their workers or pay a special fee to subsidize coverage for low-income individuals.

In theory, the plan would lower individual patients’ insurance costs by enlarging the pool of insured patients. Yet two years after its inception, the Massachusetts plan has failed to achieve its goals. The plan did not lower health care costs and did not achieve universal coverage.

Given the growing popularity of mandatory health insurance, Americans should take a close look at the Massachusetts plan.  The plan has increased costs for individuals and the state and reduced revenues for doctors and hospitals.

Costs have risen for individuals because the government must define what constitutes an acceptable insurance policy. As a result, special interest groups have been given both the incentive and the means to lobby politicians to include their benefits as part of the government-approved plan.

Consequently, the state government requires all patients to purchase benefits that are useless to many of them.  For example, Massachusetts currently requires insurance plans to include forty three mandatory benefits, including in vitro fertilization, blood lead poisoning treatment, and chiropractor services, regardless of whether customers want them.  These mandated benefits have raised the costs of health insurance in Massachusetts by 23 to 56 percent.

Costs to the state government have skyrocketed and are projected to run hundreds of millions of dollars over budget.  Since the mandated insurance is so expensive, the government has had to subsidize the costs of the premiums.

For individuals, insurance prices in Massachusetts will rise 10 to 12 percent next year, twice the rate increase of the national average.  Costs to the state will also continue to rise. The state subsidies are expected to double over the next three years, and the state has asked the federal government to help make up the shortfall of hundreds of millions of dollars.

The Massachusetts plan may cost the state more than three times the original estimates.  The state is also considering raising taxes and requiring businesses, hospitals, and insurers to pay more to fund the program.  Lastly, the state plans to slash payments to doctors and hospitals an additional 3 to 5 percent, which will make it even harder for patients to find physicians willing to see them.

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This entry was posted by Adam V. Russo on Thursday, December 11th, 2008 at 9:35 am and is filed under Massachusetts. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.