Blame Government Regulations for America’s Uninsured Problem

The number of uninsured Americans is rising. Last year, 27.4 million Americans went without health insurance, an increase of 700,000 from 2016, according to a just-published analysis from the Kaiser Family Foundation.

Government mandates deserve much of the blame. Regulations and red tape have driven premiums through the roof, pricing many Americans out of the insurance market. Nearly half of uninsured people cite high premiums and prohibitive deductibles as the reasons they aren’t covered.

Free-market reforms would enable millions more people to afford insurance that fits their needs and those of their family.

Consider how the Affordable Care Act has destroyed America’s individual insurance market. The guaranteed issue mandate forces insurers to sell coverage to all customers, regardless of their age and health status. The community rating mandate prevents insurers from charging varying premiums based on customers’ health status. And the essential health benefits mandate requires all plans to pay for a list of 10 treatments and services, which include everything from pediatric vision care to obesity counseling to psychotherapy.

These mandates deny insurers the ability to manage risk and keep costs down. Insurers have been forced to raise rates on everyone. Average premiums more than doubled from 2013, the year before Obamacare’s mandates went into effect, to 2017. In 2018, average premiums for the second lowest silver exchange plan rose an additional 36 percent. In 2019, premiums fell by 2 percent — but they’re still vastly more expensive than the average plan in 2013.

Coverage hasn’t just become unaffordable — it’s become unappealing. The health law’s mandates and restrictions have driven many insurers out of the market. In 2018, over half the nation’s countieshad only one insurer selling exchange coverage. Another 30 percent had only two insurance providers. Forty-four insurers abandoned the exchanges in 2018, while only seven new insurers entered those marketplaces.

In 2019, the number of exchange plans increased slightly over 2018 levels, but coverage options are still extremely limited. During the recent 2019 open enrollment season — which ended December 15 for those 8.5 million people buying on the federal government’s exchange — only 23 percent of counties had more than two insurers selling exchange coverage.

Obamacare isn’t the only contributor to high insurance costs. Many government regulations stifle competition among doctors and hospitals. With fewer competitors, providers can charge higher prices, which consumers ultimately pay in the form of higher premiums.

Consider that most states have certificate of need — or CON — laws, which require state agencies to approve the construction of any new hospitals and clinics. Entrenched provider groups use their political influence to block new rivals from entering the market.

This crony capitalism inflates prices for consumers. States with CON laws have 11 percent higher healthcare costs than those without such laws, according to data from the Kaiser Family Foundation.

Free-market reforms would make insurance more affordable. Nixing CON laws in Florida, for instance, would reduce health spending by $235 per person, according to researchers at the Mercatus Center at George Mason University. Axing the laws would also lead to the creation of more than 100 additional healthcare facilities, including nine rural hospitals.

Consider how deregulation has already reduced Americans’ insurance spending. The Trump administration recently finalized a rule that expands consumers’ access to “short-term limited duration” health plans. These plans are exempt from Obamacare’s mandates, so they haven’t seen the same stratospheric premium hikes as exchange plans.

By permitting these plans to last up to a year and be renewed up to three years — as opposed to the Obama-era limit of just three months — the Trump administration has given consumers a practical, low-cost alternative to exchange coverage. Monthly premiums for short-term plans are 80 percent cheaper than Obamacare-compliant alternatives.

Consumers will eagerly embrace the change. According to estimates from the Trump administration, 1.9 million people will sign up for short-term policies by 2022 as a result of the reform. Hundreds of thousands of them would have otherwise gone uninsured. It is upsetting that six states — California, New York, Vermont, Maryland, Hawaii, and Oklahoma — have restricted access to these plans.

Expanding access to short-term plans is a welcome reform, but it’s no substitute for the wholesale repeal of numerous federal healthcare regulations. Cutting through this red tape would create a vibrant, competitive insurance market where consumers are free to purchase a range of plans offering quality, affordable coverage.

Until that happens, many Americans will have no choice but to forgo insurance altogether.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top