Obamacare Is Not a Revolution, It Is Mere Evolution
Mises Daily: Saturday, October 25, 2014 by Roger McKinney
The Patient Protection and Affordable Care Act focused the attention of Americans on government regulation as few issues have. However, they should have paid attention decades earlier because states have been eating away like termites at freedom in the healthcare insurance market for decades. The PPACA adds little to existing state regulations. States began dictating to insurance companies what to cover, whom to cover, when to cover them and how much they could charge in the 1950s. Massachusetts, home of Romneycare, the template for Obamacare, enacted the first state mandate in 1956 requiring insurers to cover mentally and physically handicapped children.
States have mandated coverage in four areas: benefits, providers, populations, and rates. Benefit mandates decree types of care, such as mammograms, well-child care, drug and alcohol abuse treatment, but also acupuncture and wigs for cancer patients. Provider mandates ordain payments to healthcare providers such as chiropractors, podiatrists, social workers and massage therapists. Population mandates increase the number of people covered under a policy, such as extending coverage to non-custodial children and grand children. Rate mandates prevent insurance companies from charging premiums that reflect risk, in effect using low risk policy holders to subsidize high risk members.
Through the 1960s, state legislatures focused on commanding insurance companies to cover more people. In the1970s, states began to require that insurance policies cover non-physician practitioners, such as psychologists, podiatrists, and dentists. States expanded coverage to high-risk individuals who had been turned down for coverage by one or more insurers in the 1980s.
The decade of the 1990s ignited the war between managed care plans and their subscribers. State legislators entered the war on the subscriber’s side, launching a fusillade of new mandates dealing with the types of coverage offered. Among the many laws were minimums for hospital lengths-of-stay and coverage for hospital care following procedures such as normal childbirth, cesarean delivery, and mastectomy.
In addition, states enacted any-willing-provider (AWP) laws, forcing managed care firms to admit any provider willing to abide by the terms of the network contract. Freedom-of-choice (FOC) laws required that managed care plans allow subscribers to visit any licensed provider they desired as long as the subscriber paid a larger out-of-pocket fee when they used a provider from outside the network. Direct access mandates allowed subscribers to visit specialists, such as OB/GYNs, dermatologists, ophthalmologists, psychiatrists, chiropractors, etc., without first getting approval of the subscriber’s primary care physician (PCP). Managed care plans had tried to limit the rapid growth in medical care expenses by requiring the approval of a PCP before subscribers visited costly specialists.
The new millennium continued the onslaught of state regulations aimed at healthcare insurers. Between 1950 and 2000, states had enacted an average of 22 laws per year, with the average for the last decade rising to 57 per year. The first 11 years of the twenty-first century saw the average climb to 61 mandates per year. The chart below depicts the growth in state mandated laws over the past six decades. As of 2011, the total number of laws controlling insurance coverage amounted to 2,262 according to the Council for Affordable Healthcare Insurance (CAHI). 
Figure 1: Mandated Benefit Laws