Conservative health care reformers love to bash state regulations. In their estimation, differing regulations keep premiums artificially high in some states by restricting consumer choice. John McCain has railed against these regulations on the stump and in Tuesday's debate. Right-leaning economists claim that as many as 12 million people who are currently uninsured could end up purchasing medical coverage if interstate competition were allowed. The Illinois Policy Institute, a Springfield-based right-wing think tank, argues Illinois families could save a bundle:
With the ability to purchase insurance in Iowa, a downstate family of four could expect to save $200 per year while a Chicagoland family would save over $3,000 per year.
But as Sandy Praeger, the president of the National Association of Insurance Commissioners, told the Tribune's Judith Graham, lifting restrictions on the sale of insurance across state lines opens up an entirely new can of worms.
If the change was implemented, here’s what she predicts will happen: Insurers will set up shop in states with few regulations and market low-cost policies to people across the country. These policies will offer minimal coverage and appeal primarily to younger consumers.
“It will be a race to the bottom,” Praeger said, and there will be “very few consumer protections. … You’ll have plans that don’t cover the benefits that people need. … And healthy people are going to buy those less costly plans, because they don’t think they need [the protection].”
Want a good model? Look no further than credit card companies. In 1978, the U.S. Supreme Court ruled that banks could charge the maximum interest rate determined by state legislatures in the banks’ home states, not the interest rate of the states in which they do business. Credit card businesses quickly set up shop in Delaware and South Dakota -- two states with virtually no interest caps. The result? State usury laws were rendered worthless and consumers were left to fend off an array of confusing and punitive measures aimed at raking money from customers. Another good example is our current banking system. And we all know what happened there.
In a deregulated health insurance market, Praeger says its those who need insurance most that will be the most adversely effected:
That may be a good deal for young people who don’t have health problems, but it would probably become a bad deal for everyone else, Praeger said. The policies that sell comprehensive coverage would draw a sicker, older customer base, becoming more and more expensive.
The end result will be a segmenting of the insurance market into the “haves and have nots,” Praeger said. One segment of the market will become more affordable, but the other segment will become less so, disadvantaging those who need coverage most.
Greg (not verified) on Thu, 10/09/2008 - 10:50
“It will be a race to the bottom,” Praeger said, and there will be “very few consumer protections. … You’ll have plans that don’t cover the benefits that people need. … And healthy people are going to buy those less costly plans, because they don’t think they need [the protection].”
Translation: people are too stupid to make their own decisions.
"That may be a good deal for young people who don’t have health problems, but it would probably become a bad deal for everyone else, Praeger said. The policies that sell comprehensive coverage would draw a sicker, older customer base, becoming more and more expensive.
The end result will be a segmenting of the insurance market into the “haves and have nots,” Praeger said. One segment of the market will become more affordable, but the other segment will become less so, disadvantaging those who need coverage most."
This is one of my favorite arguments. The idea that the young and healthy won't purchase comprehensive health care -- which they may rationally determine they don't need -- and opt for cheap policies in states with less regulations. That will lead to the old and infirm being left to their own devices.
Nearly 60% of the uninsured are young and healthy. They all ready have abandoned the old and infirm because when they weigh the costs and benefits, it makes more sense to not get insurance.
Philosophe Forum on Thu, 10/09/2008 - 12:26
A good example of the uninsured are young and healthy is the unemployed SIUE student population. They have a group health plan. The more people sign up for it, the cheaper it is. Young, healthy people with little money see no reason to waste $800+ annually on something they most likely will never need. There is a lot of logic in their reasoning. . .
Accidents happen. The young and healthy get sick with no warning. It only takes one hospital stay to put them in debt for thousands of dollars. They know all these facts. ---> What are the odds? For them it is better to use the funds on absolutely-needed groceries, gas, and clothes now than possibly-will-need future catastrophic medical insurance.
ALISON, MPA
http://philosopheforum.blogspot.com/
"Responsible Leadership Serving the Public Trust"
Paul Sippil (not verified) on Thu, 10/09/2008 - 15:18
Your credit card example actually bolsters the argument for opening up the market for health care. The Marquette decision that led to the deregulation of the credit card industry and expanded access to credit for millions of Americans. It's true that consumers had to pay a price in terms of fees and the such, but requirement is not arbitrary. Riskier loans mean more defaults and bankruptcies, which higher fees and interest rates mitigate.
Deregulating the credit card industry led to more people -- the vast, vast majority of whom don't default or go bankrupt -- to get access to credit. Deregulating health insurance means that more people will have access to affordable health insurance.
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