Regulation Increases Health Insurance Costs. California Cheaper than New York.

I recently tried to help a relative purchase individual health insurance. He is in his 20s and lives in New York City. His current job does not provide health insurance benefits. He is healthy, does not smoke, and unfortunately since he is a college graduate he no longer qualifies for health insurance under his parents plan.

So naturally he asked me for help. What is absolutely shocking is how health insurance premiums very dramatically between the states. Using www.ehealthinsurance.com, I punched in his date of birth, smoking status, and ZIP code. He only had 12 choices of health insurance coverage with the least expensive being offered by Empire Blue Cross and Blue Shield at $151 per month and this is just for and indemnity plan.

A more comprehensive health insurance plan and the least expensive was $310 per month. This was being offered by Atlantis health plan which is a regional health plan, essentially restricted to the people of New York city. Because this insurance plan is so small, unfortunately, there isn't a lot of information externally about the quality of care delivered. The benefits however was that the co-pays were reasonable at $20 and there was no deductible. The down side is there is no prescription drug coverage. For that option it would be an additional $46 per month.

The next option, was offered by Oxford health plans. For a mere $372 per month, my relative could get a PPO plan but would have a $2850 deductible that would need to be met before health insurance kicked in. If there is any blessing in disguise, then it is that this program is attached to health savings account also known as an HSA. This is where people can defer money tax free, invest tax free, and spend tax free on qualified medical expenses.

If my relative moved to San Francisco, his health insurance rates will be far better with better options. Given the same information, he would have 115 choices with the least expensive being offered by Blue Shield of California at $52 per month, PPO plan with a $2900 deductible, 40% coinsurance, and $40 office visits. The next offering was from Aetna at $61 per month, PPO plan with a $5,000 deductible, 30% coinsurance, and $40 office visit. The first plan offers prescription drug coverage for generic medications, but not brand name. The latter covers both with generic medications at $15 and brand-name at $35, and those brand names nonpreferred list must meet a $500 deductible for medications before paying $50 per prescription.

Kaiser Permanente's least expensive offering was at $141 per month for a $1500 deductible, $30 office visit.

Why is this important? Although we live in the same country, and one could argue that the cost of living in San Francisco and in New York City are comparable, health insurance premiums vary wildly. This is most likely due to state regulations. Both New York and New Jersey have some of the most expensive health insurance plans in the nation. What if people in New York could get coverage at rates comparable to those in California? What would that mean to those who are uninsured, as well as reimbursement for doctors, hospitals, drugstores in New York?

What is even more critical to understand is that regulation although some well-intentioned can often increase costs and result in less than desireable outcomes. The huge variation in costs between health insurance and California and New York is more likely due to coverage and benefits insurers must offer in the latter state.

President Obama with his vision of improving the healthcare system, which I completely agree with, and his administration must be very careful on how it approaches that goal. For example, with the recent passage of credit card bill and increased regulation, we can expect fewer people to have access to credit. Don't believe what politicians are saying. Since two thirds of the U. S. economy is based on consumer spending and with tightening of credit due to increased regulation, we can expect that the insatiable appetite for goods and services will fall. Although the economy will ultimately turn around it will never be like it was in the past decade.

Good intentioned regulation may in fact increase healthcare costs. If the government tries to impose benefits and mandate an artificially low price, then we will find ourselves not with a privately run healthcare system but one run by the federal government. That would be a critical mistake.