How to Make Health Insurance Less Expensive: Stop Requiring More Expensive Plans

For those still scratching their heads, trying to
figure out how to produce a health insurance market where premiums
are less expensive, it turns out the answer is pretty simple: Allow
insurers to sell health plans that are less
expensive. Really. That’s it. 

Right now, health plans sold through Obamacare’s exchanges must
meet a variety of standards, including a minimum actuarial value,
which tells you the percentage of estimated health costs consumers
enrolled in any particular plan can expect to have covered. So a
plan with an actuarial value of 80 percent would cover an estimated
80 percent of costs, and a 90 percent value would cover 90 percent,
and so on and so forth. 

Currently, Obamacare divides plans into three tiers, Gold,
Silver, and Bronze, based on actuarial value, with Bronze of course
being the cheapest, lowest-value plans. 

The law requires all Bronze plans in both the individual and
small market to maintain an actuarial value of 60
percent. According to
an analysis by the health consulting firm Avalere, which has
been influential in coverage of Obamacare, adding in something like
a “Copper tier” with a minimum value to 50 percent would reduce
premiums by almost 18 percent relative to average premiums for
Bronze tier plans. 

It would be cheaper for consumers. It would also be cheaper for
taxpayers. With the addition of lower-tier plans, the federal
government would end up paying out about $5.8 billion less in
subsidies over the next 10 years, according to Avalere’s
estimate. 

Adding a Copper plan to the system is the sort of health-law fix
that one might expect to be embraced by some (not all) Democrats
over the next few years, because it leaves the law in place while
making it cheaper and somewhat less restrictive. That means it
could even garner support from Republicans too, depending on the
circumstances.

But the real lesson here isn’t about the particular savings or
the management of the law. It’s that restrictive government
mandates make health insurance more expensive, and while mandates
aren’t the only factors that determine premium pricing, if you
loosen or remove those mandates, insurance becomes cheaper. It’s
that simple.