His claim assumes that what makes insurance expensive in places like New Jersey—where the annual cost of an individual plan for a 25-year-old male in 2006 was $5,880—is merely the higher cost of medical services in the Garden State. He sounds an alarm in the rest of the country by suggesting that an individual living in, say, Kentucky—where an annual plan for a 25-year-old male cost less than $1,000 in 2006—would be asked to subsidize plan members living in high-priced states.
That's not how interstate insurance would work. Devon Herrick, a senior fellow with the National Center for Policy Analysis who has written extensively on this subject, notes that insurance companies operating nationally would compete nationally. The reason a Kentucky plan written for an individual from New Jersey would save the New Jerseyan money is that New Jersey is highly regulated, with costly mandated benefits and guaranteed access to insurance.
Our current system has well meaning states mandating benefits, which the insurance companies gladly add and add to insurance prices. Why not make insurance transparent (in terms of explicit benefits) and competitive? Might that not decrease health care costs?
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Competition alone without intelligent regulation won't solve the problems of the health system. People do not know what they might get in advance and cannot shop around once they do know. The result is that they won't be able to know which plan to buy except on cost alone. Then when they get sick, the cheaper plans will inevitably cause these people to run out of benefits faster. If they risk bankruptcy, then we all pay for their financial choices.
That's not "competition" – it would simply encourage a "race to the bottom" in state regulations such that health insurers would flock in to be relieved of the regulations of the states in which they actually serve their consumers. We've seen a similar "race to the bottom" in the regulation of corporations, with a lot of companies registering their corporations in states like Nevada or Delaware to minimize their annual franchise fees, state taxes, and to avoid certain regulations, but that has nothing to do with expanding their businesses into other states.
Well I wrote a long response – but the website/my computer just ate it. So I'll write a short one. If interstate competition is such a great answer – why does any insurance policy in Florida (be it private insurance or a Medigap policy) cost about 40% more in south Florida than north Florida? Robyn
The answer to my question has nothing to do with mandates or prices (which are perhaps a little cheaper in north Florida – but not 40% – especially when it comes to the doctors we use). Has everything to do with overutilization and – especially in the case of Medicare – fraud (south Florida is the Medicare fraud center of the US).
Apart from these 2 factors – the only way to lower health care costs is for people who are relatively healthy to avoid first (or nearly first) dollar coverage (which pretty much costs close to $1 for $1 of coverage) - and use things like HSAs for pay for their routine maintenance (and if they don't use something like an HSA – it's simply part of the family budget – like the cable bill). Heck – I can't buy auto insurance without at least a $1k deductible these days – and – for windstorm coverage – it's a minimum of 2% of the insured value of my house. And the likelihood of my incurring health care costs of $0-5k a year are much greater than the chances of my getting in an auto accident or going through a hurricane. Robyn
I must be prescient. There's an article in our local paper today about how our local Medicare costs are 11% above the national average – but those in Miami are 39% higher! http://jacksonville.com/business/2010-01-24/story/jacksonville_gobbles_health_care_but_its_still_no_miami
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