Why purchasing insurance across state lines will not solve the health care crisis - Part Two

October 4, 5:25 PMLiberal ExaminerJenny Kakasuleff

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Senate Minority Leader Sen. Mitch McConnell of Ky. gestures during a news conference on health care reform legislation, Friday, Oct. 2, 2009, on Capitol Hill in Washington. (AP Photo/Evan Vucci)
 

While opening up the marketplaces where only one insurer provides coverage, or a single insurer dominates 80% of the market share could conceivably solve this problem – it could also serve to exacerbate shortfalls that currently exist within the system.

A study by the New America Foundation found that such an approach would serve to lower premiums for the healthy while raising them, and limiting coverage for those who are sick and need it the most.

Republican plans would not include a guaranteed issue provision that would prevent insurers from cherry-picking consumers. Thus, aggressive underwriting toward the healthiest Americans into a bare-bones coverage option would be incentivized, as well as weeding out the neediest.

Supporters realizing as much have proposed government-funded high-risk pools to ensure that the sickest among us are not forced out of accessible care entirely. According to the Wall Street Journal:

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.”

Apparently, the same government that wants to pull the plug on grandma is perfectly fit to assume caring for the sickest folks in the country – and patient choice is only for healthy people. The congressman is correct that their numbers are tiny – their health care costs, however, are not. The 5% of the population that would be included in this high-risk pool consumes 50% of the total health expenditures in the country; equal to $1 trillion per year.

Opening up the marketplace would have the effect of de-regulating the insurance markets that each individual state currently oversees. Insurers will simply relocate to those states where benefit mandates are the least generous; essentially creating monopolies in a few states and rendering useless any attempt by the rest of the states to regulate their individual markets.

Avi Frisch draws a parallel to the resulting effect of republican plans on health care reform:

In corporate law, Delaware has systematically forced down standards of corporate governance to attract incorporations and the taxes and fees that accompany them. This works to the detriment of shareholders who own but do not manage the companies, by allowing CEO's and boards free reign to manage companies in their own interest.

Delaware (along with South Dakota) has also systematically destroyed restrictions on usurious credit cards. Loose laws in both states wind up allowing banks legally operating out of those states but lending everywhere to charge extremely high interest rates without fear of usury laws.

Similarly, Delaware or some other opportunistic state would doubtless enact health insurance laws under the proposed reform of Congressman Boustany, making the worst possible health insurance the main offering available for virtually everyone in the private insurance market in all states. This will mean that not only will the individual states lose the ability to regulate health insurance, but the power to determine health insurance rates will be given over to that state with the most craven interest in attracting tax dollars regardless of how the public is harmed.”

It is somewhat ironic that the party which so often touts itself as the protector of state’s rights would intentionally allow a for-profit enterprise to trample all over the laws and consumer protections that were put in place by the citizens of the states.

According to several sources, “A modified across state lines proposal could benefit all Americans in the context of 1) guaranteed issue and low-income premium subsidies or sufficiently funded high risk pools, and 2) federal licensure and regulation of insurers.”

Like trickle-down economics, the emergence of greater competition and lower costs by opening up the marketplace is mostly theoretical and does not receive overwhelming empirical support. According to a 2007 study by Rutgers University:

...the body of research provides little in the way of compelling evidence that state insurance mandates have had an important impact on these outcomes. This assessment reflects the failure of such work to yield consistent empirical evidence in support of the precise mechanisms through which mandates may achieve their adverse effects: increases in health insurance costs which, in turn, yield a decline in employer offers of coverage (especially among small firms) and result in subsequent increases in uninsured rates. The failure to obtain results that consistently support the claims that mandates may have adverse consequences on such outcomes should give policymakers pause as they seek to focus on mandated benefits as a primary reason for rising health insurance costs."

The goal of health care reform should be in shifting the focus from a for-profit business into a patient-centered service. Lawmakers on both sides of the aisle are failing miserably to act with any sense of conviction and urgency, which only serves to confirm and exacerbate the cynicism that prevails in the current political environment.
 

Copyright 2009 Jenny Kakasuleff