Why Not Give a Real Health Insurance Free Market a Chance?
In 1945 the McCarran-Ferguson Act was passed. Basically the legislation gave the States, not the federal government the right to regulate the business of insurance, including of course health insurance. Then as now the key argument in favor of McCarran-Ferguson was that individual states have individual needs, and therefore are better equipped to regulate the insurance needs of its citizenry than the federal government.
However today we live in a day and age of interstate, even global commerce. With a few clicks of a mouse, you can buy anything from across the country or across the globe. Does it really make any sense that a person shopping for low cost health insurance in New York can’t buy a health insurance policy from an insurance company in Boise Idaho, where it is considerably cheaper?
Other financial industries, like banking have opened themselves up to interstate commerce for the betterment of the consumer and the industry. If I am looking for a loan or a mortgage, yes I can deal with a local company if I so choose, but I can also check the competitive rates from large interstate bank like Bank of America. I recently purchased auto insurance at a very low rate from a company that advertised you can go to their website and “quote, buy, print” – and within in minutes have auto insurance. Are they based in the state where I live, nope. Did I get a policy cheaper than my local agent who I had been dealing with for years? Sure did. So why not the same options when in comes to finding low cost health insurance?
A good part of the reason is mandates that states; since they have the power to under McCarran–Ferguson; force health insurance companies to comply with. Many of these mandates take the shape of benefits that not every consumer in the state needs or wants. But the state has the right to make insurance companies offer coverage for say acupuncture, or fertility treatments. All in all there are over 1800 such mandates nationwide, and they drive up the costs of health insurance. For example a recent study found that a healthy 25-year-old male could obtain a basic health insurance policy in Kentucky for just under $1000.00. That same policy in a state in the northeast like New Jersey would cost him almost $6000.00.
The same study found that a fairly typical family health issuance policy for a family of four consisting of a $2000.00 deductible, and 20% copay, could be had in Kansas City for around $170 dollars a month. In New York City that same healthcare plan – almost $900.00 per month. Why shouldn’t a dad in NY struggling to support his family be allowed to buy the cheaper health insurance policy from Kansas?
When people talk about creating a free market solution to the health insurance problem in the country, today perhaps it is time to open up the market to all 50 states. This way we can create real competition, if we want to reduce the number of the 47 million people without access to affordable medical coverage where they live.