Tax cuts surely helped turn North Carolina into the national economic competitor we’ve become. But recent trends risk gutting the positive returns tax cuts can offer in the future.
After all, what good are tax cuts when businesses and families must redirect their tax savings to cover sky-high health insurance premiums?
The issue isn’t the insurance companies. They’re not somehow deciding to charge more for health insurance in North Carolina than they do just across the border in Virginia or South Carolina.
The issue is North Carolina’s government mandates on health care, and the problem extends well beyond certificate of need (though that certainly drives up costs). Government mandates increase the cost of health care which increases the cost of insurance premiums.
An ever-increasing volume of government mandates are draining money from North Carolina families and businesses, and they’re sapping up the competitive advantages North Carolina enjoyed for the past decade.
North Carolina families and businesses now pay higher monthly health insurance premiums than residents of every other state in the Southeast, and it’s not even close.
Our $666 average monthly premium is 25% higher than the Southeast average. It’s even worse when comparing to our direct neighbors: North Carolinians pay a full 40% more per month than residents in Virginia, South Carolina, and Tennessee.
Health insurance costs are like a hidden tax. They eat away at company and household bottom lines, eliminating money that could (and should) be used to save, invest, or consume. They drag economic growth and stifle productivity.
Yes, rising health costs afflict every state, but North Carolina’s trajectory is far worse than national trends.
From 2010-2015, employer-sponsored premium costs actually grew slower here than the national average. But since 2015, they’ve accelerated, and it’s getting worse.
On the employee side, contributions to premium costs grew by 40% between 2015 and 2020, compared to just 27% nationally. Between 2019-2020 alone, employees forked over 11% more to cover premiums in North Carolina — two-and-a-half times the national rate.
Legislation mandating or forbidding particular practices often benefits certain players in the health care industry. And I don’t entirely blame legislators who push these policies — they’re often approached with sympathetic rationales. But for every benefit there’s a cost, and that cost usually means higher health insurance premiums.
Take one week last month as an example. The House passed six bills that, taken together, will cause insurance premiums and drug costs to increase.
The bills are complex matters of health policy, and that makes it all the more difficult for anybody outside the industry to recognize that these types of actions are part of the reason North Carolinians pay so much more than everybody else.
For example, H.B. 649, by government mandate, hamstrings health insurers’ ability to tell providers, “Hey, wait a minute; I think you might be ordering too many procedures here.” The practice is called prior authorization, and it’s a big way keep costs — and therefore premiums — down.
While prior authorization does add an extra step, the practice undoubtedly saves money and assures appropriate care. That’s the tradeoff: There may well be a sympathetic argument to add yet more mandates to prior authorization practices, but there’s always a cost to that.
Another bill, H.B. 246, mandates an increase in the fees patients pay to pharmacies when picking up prescriptions. It also comes awfully close to banning mail-order prescription delivery, which is cheaper and more convenient for patients, especially those who are elderly or ill or live in rural areas.
Independent pharmacists will reap the benefits, and they surely offered a sympathetic reason for it. But all of this will result in higher prescription drug costs.
Another one, H.B. 560 would enforce mandates — against federal recommendations — for certain medical tests that are often more expensive. Of course, “more expensive” means more profits for certain providers and higher health insurance premiums for everybody else: more costs.
There are others too, and a recent Carolina Journal story goes into detail.
Like running a bath with an open drain, North Carolina won’t reap the benefits of tax cuts so long as government mandates keep pushing health costs higher.