Well, It Is A Day That Ends In “Y”
So it must be time for the Wall Street Journal to propose a health insurance reform that would save insurance companies money. It’s refreshing when you wake up knowing exactly what’s going to happen.
Today’s idea is that we should remove interstate barriers to insurance sales, because of all the awesome that will ensue:
That’s not how interstate insurance would work. Devon Herrick, a senior fellow with the National Center for Policy Analysis who has written extensively on this subject, notes that insurance companies operating nationally would compete nationally. The reason a Kentucky plan written for an individual from New Jersey would save the New Jerseyan money is that New Jersey is highly regulated, with costly mandated benefits and guaranteed access to insurance.
Affordability would improve if consumers could escape states where each policy is loaded with mandates. “If consumers do not want expensive ‘Cadillac’ health plans that pay for acupuncture, fertility treatments or hairpieces, they could buy from insurers in a state that does not mandate such benefits,” Mr. Herrick has written.
A 2008 publication “Consumer Response to a National Marketplace in Individual Insurance,” (Parente et al., University of Minnesota) estimated that if individuals in New Jersey could buy health insurance in a national market, 49% more New Jerseyans in the individual and small-group market would have coverage. Competition among states would produce a more rational regulatory environment in all states.
A “more rational regulatory environment” is a synonym for a much smaller regulatory environment. If I were in charge of a state with a dying city (say, Michigan), the first thing I would do is get rid of every single restriction on health insurance in state law, and then encourage tax abatements or even permanent tax restructuring for health insurance companies who wanted to locate in Detroit. Within ten years, every major insurer in the nation would be located on Woodward Avenue, and Detroit would be the Wilmington, Delaware of the health insurance industry.
I mean, there are some little downsides. Virtually every base-level insurance plan in the country would become a high-deductible plan with high coinsurance rates. So-called “Cadillac” plans (you know, the ones that cover you when your neighbor decides to play “Elvis Watches The Teevee” but misses because of his undiagnosed glaucoma) would invariably become more expensive as the lack of any regulatory structure allowed pool-splitting. If you hate insurance company bureaucracy today, imagine what happens tomorrow when massive call centers are handling policies from all over the country. Guaranteed issue rules would die, meaning that when you bought into the cheapest insurance and got any of the conditions that it didn’t cover – for instance, sickness – you would now likely be barred from ever being insured by a private insurer for those conditions. Oh, but there’s a solution for that!
This doesn’t mean sick people who have kept up their coverage but are more difficult to insure would be left out. Congressman Shadegg advocates government funding for high-risk pools, noting that their numbers are tiny. The big benefit would come from a market supply of affordable insurance.
So, as we all head towards that dark midnight of the body, increasingly racked by the various diseases that come along with the aging process, we would enter into a sort of large-scale government pool that would cover anyone who qualified…sort of a “Medicine that Cares”, but for all of us. That’s a darned good plan, Shaggy! Especially when a national market makes almost anyone over the age of 40 “high risk”. Truly, this Shadegg is a prince among men.
It’s great to endorse market competition, but when you have a market that’s fundamentally based on taking in as much money as possible to insure as little as possible, an unregulated national market is the surest way to maximize that profit while minimizing the benefit for consumers. On the plus side, I think we might get more calendars reminding us to ask our insurer about Avodart and Zoloft. I could always use a good calendar, myself.