Be careful what you wish for…
In October of 2011, Governor Brown (Ca.) signed several new laws. One of them (SB 222) requires that after July 1st, 2012, all insurance companies must “cover” maternity services. The SF Chronicle covered this story with its October 7th, 2011 article entitled, “Maternity care a must in plans with new law.” I will deal with the term “cover” in a moment, but first a bit of clarification.
The new law pertains only to individual policies. Currently, all health maintenance organizations (HMO’s) and health insurers who provide plans to groups, must include maternity coverage. Typically the self-employed, people between jobs (who elected to not pay COBRA), or those that do not have or cannot afford coverage are the people most affected by this new law.
Now I do not wish to get into a political debate regarding universal healthcare nor do I want to teach a college course on basic economics. Both of these topics would lead to some pretty complicated discussions. This blog is about “simplifying” insurance. So let’s keep this simple. As it pertains to the new mandate, I have several points to make.
First, the phrase “cover” as it is specified in the new law, simply means the insurance companies can no longer exclude coverage for maternity services. But that coverage would still be subject to the plans deductible and coinsurance. One of the sponsors of this bill, State Senator Noreen Evans (D – Ca.), discusses the legislation below. In the video she mentions that there was no real fight put up by the insurance companies. Why is that? Well most of the “affordable” individual policies offered today have between $5,000 – $10,000 of exposure (deductible + coinsurance). The average cost of a normal vaginal delivery in California is $6,000 – $8,000. So… in most cases with this new law, the insured would still be paying the cost of the childbirth, not the insurance company.
Second, the laws mandates a change to all existing policies (currently without maternity) and any future policies sold after July 1st, 2012. However, pregnancy is still a preexisting condition. The law does nothing to change that. So, if you find you are now pregnant and without insurance coverage, the insurance companies can still deny your application due to your pregnancy status. I know… is sounds stupid and it is. But again, since SB222 did nothing to address this, the insurance companies don’t have to accept women who are already pregnant. Why would the companies fight that!
Lastly, the sponsors claim that this legislation was brought about by the lack of individual and family plans that provided maternity coverage. This is true. In 2011, only about 15% of individual plans offered maternity coverage. That is down from a high of about 80% of plans in 2005. However this is largely due to childbearing females (age 18-35) who are simply choosing to not pay for plans with maternity because they are more expensive. This is the exact definition of the term “adverse selection” which the insurance industry is predicated upon.
As a broker/agent, I receive hundreds of calls each year from women without insurance who have become pregnant. Historically, with the exception of directing them to some state programs, there is nothing I can do for them. These programs like AIM (Assistance for Infants and Mothers) and Medi-Cal are primarily responsible for those who simply choose to go without insurance or that truly cannot afford it. In both cases, this new law does nothing to address these issues.
As a business owner and advocate of personal responsibility, my concern is that every time the government gets involved in trying to “fix” problems, we all end up paying more. The system is broken, but when legislation is so easily passed (refer to the video) without major opposition of the insurance companies, you have to question what has really been accomplished. Sharing the expenses to reduce the overall burden has merit only if it involves the participation of those that ultimately receive the services. It is time that they pay their fair share. Otherwise be careful what you wish for or it will again be only the responsible members of society footing the insurance bill for those that go without.
Wishing you good health,
Michael Lacerda
Simplifying Insurance 