Why can’t people living in New Jersey buy health insurance available to residents of, say, Pennsylvania?
Rep. John Shadegg, an Arizona Republican, thinks they should — and today will reintroduce legislation to make that possible.
The Health Care Choice Act would allow residents in one state to buy health insurance that is available in and regulated by another state. If enacted, the law would create a competitive, 50-state market for health insurance, likely making it cheaper. It would do this without imposing a large cost on taxpayers and without creating a new government bureaucracy.
As the author says “This should be a no-brainer for Congress.” More competition, less expensive. Win win win. But Democrats are against it. Why?
To understand how this works, we need a bit of background.
Insurance companies are required to satisfy state laws when selling insurance to residents of that state, but state laws vary widely: some restrictive; some not so much. For example, New York forces insurance companies issue policies to anyone, and to charge everyone the same premium. Other states like Idaho have few restrictions. Some states require lots of coverage—chiropractic, alcohol treatment, mental health; some less. Some states grant more leeway to exclude pre-existing conditions, or to price people out of the market.
Its understandable that insurance companies who, after all, have to answer to shareholders and are themselves facing competition from other insurers—don’t want to be told who they issue policies to, and how comprehensive the policies should be. Some people cost a load of money, for example diabetics, cancer survivors, children with birth defects. Insurers want the ability to deny those people coverage, or to at least charge them a lot of money. As the WSJ says “One of the most expensive state-level regulations is “guaranteed issue,” which requires insurers to sell insurance to anyone willing to buy it”.
Well, yes, that is expensive. But isn’t that kind of what insurance is all about, spreading risk? Whatever the merits of some of the state mandates, one thing is clear: its much easier to deny coverage to sick people under Idaho’s rules than New York’s. And that’s what the “Health Care Choice Act” is all about, creating an regulatory environment in which the only affordable policies are written under Idaho-type rules—rules that allow insurers to more easily force sick people off their coverage—or deny it in the first place.
Given the deregulated environment that the “Health Care Choice Act” would engender—and the increasing breakdown of the employer-based group system–it’s likely that Americans under 65 would eventually divide into two camps: healthy people with private insurance and unhealthy people who receive healthcare through some means tested, public program like Medicaid—a program they will qualify for only after having spent all their money, sold their house, and given up hope of living anything resembling a middle class life.
Of course the free marketeers like Shadegg are currently chipping away at Medicaid too.
Incidentally, the piece I’m quoting from was written by Merrill Matthews, the executive director of the Council for Affordable Health Insurance, an industry supported group. To be fair, his group advocates guaranteeing coverage to the uninsurable via state High Risk Pools, but such pools are already notoriously dysfunctional, underfunded, and non-existent in many states. Deregulating the individual market even further would ensure an additional wave of uninsurables that states are utterly unprepared to deal with.
So lets be clear what this choice is about. The Health Care Choice Act makes total sense for private insurers. But does it make sense as public policy? Should being diagnosed with a serious illness mean giving up all hope of living a middle class life? What kind of society allows its sick—-cancer survivors, diabetics, children with birth defects—to be tossed overboard like this? What kind of society do you want to live in? That’s the choice.