Health Insurance Third Way

There are clear problems with the existing health insurance regulations, but one that gets notable attention is that purchasing health insurance ‘across state lines’ is forbidden.

Some argue for the need for States’ ‘protection’ regimes, while others argue for the efficiency of competition (like car insurance).  Federalists are often torn between the States’ competition and market competition, and fear centralized rules at the Federal level.

Even the Congressional Budget office makes a strong argument for enabling competition, saying:

“Therefore, CBO expects that there would be an increase in the number of relatively healthy individuals, and a decrease in the number of individuals expected to have relatively high cost, who buy individual coverage.”

But the choices presented are a false dichotomy: either the States regulate and force their preferences on their residents, or the Federal Government decides the regulations.

We already have a hybrid situation, in limited situations (College students, new movers, temporary workers, etc.): If I have a policy purchased under one State’s regime and visit another State and need to use the insurance, the originating State’s regime dictates my contract terms, even if care is provided elsewhere. This doesn’t seem to bother anybody or have adverse outcomes.

So, perhaps an acceptable middle ground might be to allow people to purchase policies as if they were residents of the State of their choosing, much as an individual can form a corporation in another State.

Then, each State can compete in the laboratory with their regulatory regimes, but people/patients can still sign up for as much State ‘protection’ as they feel comfortable with. The States won’t have to give up their powers, but they will have to develop compelling offerings. The only thing the States will have to give up is the power to force their regime on the residents of the geographic area they claimas  their jurisdiction, but it’d take a dyed-in-the-wool authoritarian to accept that as a necessary condition for good health policy.

Federalists could accept this as a way of not centralizing authority but allowing competition.