California to Mandate Maternity Coverage

Today’s Managing Health Care Costs Indicator is $12,320 to $17,093

The Los Angeles Times reports that the California Legislature has just passed a bill that would mandate that individual health insurance cover pregnancy-related expenses. 

California already mandates maternity coverage for health maintenance organizations and for state-regulated employer insurance, but until now insurers have been able to write individual policies that exclude coverage for pregnancy.

The $12,320 to $17,093 is the range of estimates of hospital and obstetrician costs is from the International Federation of Health plans in 2009.  This data is not trended forward from 2009, and does not include costs of anesthesia.  This is also for a vaginal delivery; cost is higher for Caesarian Section, which represents about 35% of deliveries in the US at this point.

Governor Jerry Brown has not yet announced whether he will sign the bill. Should he?

Pregnancy is often planned – so theoretically prospective moms could plan their finances to account for this expense.  However, delivery is just too expensive for most people to be able to pay this out of pocket.  It seems to me that pregnancy is exactly why we should have social insurance and share the cost burden across the larger population.

On the other hand, voluntary individual health insurance premiums will rise substantially if  pregnancy is covered.  Women could sign up after their positive pregnancy test – and thus deprive the insurance pool of their pre-pregnancy premiums.   Hence, the cost of the health insurance premium would need to be very high, to account for adverse selection, the selective recruitment of those likely to have the highest medical bills.  Health insurance which is unattractive to the healthy is unsustainable.

This is the problem of voluntary, ‘guarantee issue’ individual health insurance – it’s in each person’s individual best interest to sign up only when she needs benefits, but this limits the ability of the healthy to subsidize those with health care needs. 

The Affordable Care Act’s individual mandate addresses this issue, although it’s wildly politically unpopular to require that Americans purchase private health insurance to avoid a penalty.

Jerry Brown will find it difficult to veto this bill.  He’ll want to show solidarity with pregnant women, and make it easier for them to obtain proper prenatal care.  The maternity care needs to be paid for one way or another – we’re not going to force women to have their children on kitchen tables.   If Brown  does sign the bill, premiums will rise rapidly in the individual market, making it difficult for many to afford the health care insurance they currently have.  

It’s easy to see why policy experts are much more enthusiastic about the individual mandate than Americans filling out public opinion surveys!

Addendum: LA Times editorial supporting mandate