The Folly of Interstate Health Insurance Competition
Like many good citizens, I am in the midst of evaluating presidential candidates and their proposals to address health care concerns. As a lifelong conservative Republican, and as a career employee benefits consultant, my focus is on the repeal of ObamaCare. What the candidates are proposing is of great interest to me personally and professionally. The three candidates' plans, though, lack real substance, relying on bumper-sticker platitudes that make better sound bites than health care policy. Yes, repealing ObamaCare is the ticket to the dance floor, but what comes next should be of greater interest.
Among Romney, Santorum, and Gingrich, all three advocate practically identical treatment of health insurance in the post-ObamaCare world: allow the purchase of health insurance policies across state lines. The logic is that a resident of California is subject to mandated insurance benefits that have an enormous cost in terms of premiums. Since other states have fewer mandates, we may reason that the same policy (sans California mandates) necessarily costs less elsewhere. By allowing a California resident to purchase a health policy from, say, Arizona, voilà! -- health insurance costs will go down as a result of increased interstate health care insurance competition. Moreover, savvy state legislatures wishing to increase policy tax revenues will clamor to remove costly mandates to gain price competitiveness. What a bargain! We all benefit from a cornucopia of political and economic goodness.
Continued analysis of this reasoning leads one to ask some important questions -- the first of which is, what will need to be done vis-à-vis the McCarran-Ferguson Act of 1945? Following the 1944 United States v. South-Eastern Underwriters Association decision, Congress enacted McCarran-Ferguson to restore the authority of the states in regulating insurance contracts written within their borders in direct response to 10th-Amendment concerns raised by the states. Thus, health insurance regulation was kept at the state level. If we wish to allow interstate health insurance sales, will we not have to amend or repeal McCarran-Ferguson? Do we really want to do that?
OK, let's say we do want to pursue this. The stated goal is to encourage interstate insurance policy sales. But the authority to regulate interstate commerce rests with the federal government, via the Commerce Clause. This is where I have a real problem. Conservatives say ObamaCare should be tossed out because we don't want the federal government regulating health insurance. Indeed, we rightly argue that ObamaCare's individual mandate violates the Commerce Clause. So why does each of the Republican presidential candidates advocate a policy that brings us right back to granting the authority of the feds to regulate health insurance?
No matter how much trust conservatives have in a Republican administration promoting this policy, the inevitable result is that the federal government will have consolidated power to regulate health insurance forevermore. What happens when the next Democrat enters office, then? Another round of reform and more consolidation of regulatory authority are likely to ensue. We give away the 10th Amendment when we promote the sale of policies across state lines.
The problem with health care insurance cost is health care cost! We are an aging population with increased health care needs. Those needs are met with increasingly expensive treatments, drugs, and technology. Ours is a nation of increasing age, declining health, and a stagnant economy. Tinkering with the financing of health care simply does not have the potential to significantly reduce costs long-term. We need to address the underlying drivers of health care costs directly: consumers and providers.
Let's demand health care cost transparency. Tell consumers what it costs for their care. Give them options by informing them of cost and quality by provider. If that arthroscopy procedure can be done cheaper across town, tell them how much and by whom! Put the providers in the position of competing in a transparent market. When consumers demand better information, they will hold their providers accountable. The docs will have to behave like every other business -- by competing.
Because health insurers operate based on profit margins averaging 6 to 8 percent in recent years, we cannot expect to significantly reduce the cost of health insurance by beating up the health insurers. That's not where the money is! Ignoring the health status of the consumers and the economic constraints of fee-based health care delivery models only prolongs the problem. Conservative-minded Americans instinctively know that both ObamaCare and interstate insurance sales don't help. Consolidating regulatory power to Washington, D.C. is never the answer.