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Legislation (SB 208) is now sitting on Gov. Martinez’s desk that would, at least in theory, bring greater transparency to health insurance pricing.
The long and short of the bill is to set up new requirements if a company wishes to raise rates. Rising health care costs are of course a problem, but nothing in it will contain or reduce health care costs for New Mexicans.
Nonetheless, the legislation is designed to achieve “mom and apple pie” status. Who could oppose transparency that makes it more difficult to raise rates? In fact, we at the Rio Grande Foundation have been at the forefront in promoting government transparency in recent years.
Transparency is generally a good thing, but it doesn’t save this bill. That’s because the problem with health care in New Mexico and in the United States in general is not a lack of transparency, but a proliferation of government mandates and regulations that transform health insurance companies from competitive companies operating in a free market to the equivalent of a heavily-regulated government utility.
The problem with SB 208 is not that it, on its own, will destroy health care in New Mexico. The problem is that the legislation and the mindset behind it further perpetuates the belief that we are just a few additional regulations away from better quality, more cost-effective health care. What we need are pro-market health care reforms, not more meddling in how insurance rates are adjusted.
It is instructive to compare more lightly-regulated markets with health care. We have a competitive market that “regulates” the price of car insurance and life insurance — not to mention the prices of computers, food, and many other objects we purchase in our daily lives (without an elaborate and costly review process). Imagine if every year the Albertson’s or Smith’s grocery store down the road had to go through an elaborate hearing process with the Public Regulation Commission (PRC) every time they wanted to charge a different price for a box of cereal or a pound of beef.
The result of such a process would be major price increases, a lack of flexibility, and a net reduction in both price and quality competition. The average person intuitively understands that supermarket “transparency” and involvement of the PRC in setting prices would be unnecessary and costly. But Albertson’s and Smith’s are – at least relative to the health insurance industry – nearly unregulated. Unfortunately, this is not the case in health insurance.
The Legislature did nothing this session to peel back New Mexico’s 57 mandates or make the provision of health care any cheaper (by eliminating the gross receipts tax on deductibles and co-pays or reforming Medicaid, for example). And, of course, the Obama Administration has further locked in existing inefficiencies in the system through onerous regulations from Washington.
The attitude that more government regulation is doomed to continue making health care more costly and less responsive to customer/patient needs. Until we have policies in place that encourage a competitive market, no amount of reviews or transparency will make health insurance — or health care — more affordable.
Rio Grande Foundation