Interstate Insurance
By Amit Singh | Sunday, February 7th, 2010 | PolicyGiven the recent surge by the GOP derailing the healthcare bill (temporarily) to the point even Obama is seeking advice at Republican Retreats, I think this is an opportune time for the GOP to finally take the lead on the issue. One idea Republicans have touted but have done nothing about is allowing the purchase of health insurance across state lines. If just the “Red” states banded together and allowed their citizens to buy from each other’s states then that would go a long way in improving healthcare while driving down costs without getting the Federal govt involved.
The major argument from the Democrats against purchasing across state lines is that they claim it will be a way for people to evade mandates and it will cause a “race to the bottom”. Without getting into the fact that mandates are in fact why many people cannot afford healthcare to begin with, being insured by plans from other states is already happening on some levels. Students attending college out-of-state are often covered by their parent’s plans and even though my company is based out of Virginia, we have employees living in Maryland, Pennsylvania and DC under the same plan without any problems.
Similar to how Virginia has reciprocal tax agreements with KY, MD, DC, PA and WV, I believe Gov. McDonnell could initiate a reciprocal insurance agreement with other like minded states. On average each state has about 40 mandates on insurance while VA has 60 so I’m sure there will be a few insurance companies against it unless VA also reduces its mandates. In the end, by reducing govt regulations and allowing the Free Market to perform, we the citizens will get better access to higher quality healthcare at lower prices.
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5 Responses to "Interstate Insurance"
Every bit as important as interstate insurance is a change the Commonwealth could make on its own, and that is allowing small businesses to form associations for purchasing group insurance.
Currently, each business must seek rating individually and most small businesses lack the numbers to make an effective bargaining group. This is why most small businesses do not offer health insurance.
To use my own dental practice as an example, I have myself and two employees. All of us are over 50 and one is a breast cancer survivor. The “group” rates we can get are no better than individual rating.
But if all the dental practices in the state (or better, the nation) could form one large group, with all their employees, we would have bargaining power on par with WalMart and health insurance for small business employees would be practical.
This is a change the state can make with no help from Washington.
do not lose sight of the ball. Perriello (ugh) is introducing legislation to eliminate health insurers antitrust exemption which will pave the way for everybody & their brother to get in that field: you might think your rates would go down as new carriers “bought” business, but would they pay claims? yep, i’ve seen the same thing happen in property & casualty insurance.
good point Don. I’m not sure what the govt is doing to prevent that from occurring today. I would think it is the insurance companies who don’t want that. perhaps some sort of cooperative or other corporate structure could allow for this without even getting the State govt involved.
@kelley, agree that some fly-by-night insurers would not pay claims but very quickly the consumers would wise up and actually put more scrutiny into their healthcare purchases. 3rd party watchdogs and consumer reports would start to give ratings based on quality and cost. this actually is exactly what the Free Market needs to function properly and it will help everyone in the mid to long term.
“3rd party watchdogs and consumer reports would start to give ratings based on quality and cost.”
Amit,
This is a really good point. An argument for madates and state limitations is that insurance is complex and the average customer won;t knwo what they are buying and therefore get duped. But look at another very complex and expensive product… automobiles. The average consumer doesnt know all the details of a car. But there are lots o third party reviews and consumer ratings that people use to make their purchase. And because people use these, car manufactureres compete to get good ratings and that force makes most cars a pretty hih level o0f quality. The same thing is liekloy to happent o insurance if everyone actually had to shop around for their coverage. Consuemr reports and the like would start rating them on quality, price, claims service, etc… and once that becomes popular no provider would want bad ratings and would be competeing for high reviews so they could advertis it… just liek car companies advertise it when they get good ratings.
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