Going Out of State
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
With health insurance premiums spiraling upward, efforts to cut costs are crucial. Rep. John Shadegg, a Republican of Arizona, champions a simple and elegant idea: Allow people to shop around for insurance out of state. To those in New York and New Jersey, this would result in savings of thousands of dollars a year, and reduce the number of uninsured. Sound good? Here’s the problem: The strongest opposition to the idea comes from congressmen in those same two states. These members of Congress need to take a hard look at why insurance costs are so high in their home districts.
More and more Americans find themselves in the individual insurance market – that is, having to purchase health insurance for themselves, rather than receiving it from an employer. The problem is that many states so heavily regulate this market that often it is impossible to find an affordable policy.
The hyper-regulation trend is recent. In 1965, relatively few states placed mandates on health insurance – only 7 benefits were on the books across the nation. Four decades later, according to the Council for Affordable Health Insurance, there are 1,843 mandates, requiring even a “basic” insurance policy to include certain providers and services.
The list of mandated providers is long: acupuncturists (in 11 states), chiropodists (3), denturists (2), massage therapists (4), and osteopaths (24). Some states also mandate that specific services be covered: birthing centers with midwives (6), dental anesthesia (27), hair prosthesis (7), and temporomandibular joint (TMJ) disorders (19).
Some states have gone further. “Guaranteed-issue” laws force insurers to sell to any applicant; “community rating” requires insurers to offer the same price, regardless of age and health. Combine the two, as New York and New Jersey have, and the young and the healthy – facing higher premiums for insurance they seldom use – drop their coverage, leaving an insurance pool of older, sicker people, and even higher premiums.
A leading online insurance brokerage, eHealthInsurance, recently calculated the cost of a standard individual insurance policy ($1,000 deductible with a 20% co-insurance) across the nation’s 50 largest cities, comparing some 4,000 insurance plans and 140 insurance companies. Insurance in the top 10 cities is quite affordable – all under $60 a month. In contrast, New York City ranked dead last, with premiums averaging $334 a month. The survey didn’t list any cities in New Jersey, but the situation is worse in the Garden State: A typical family policy now costs more, per month, than the lease of a Ferrari.
Just as troubling is the dearth of healthcare choices in many parts of the country. With so much regulation, coupled with multiple mergers, fewer and fewer insurance carriers compete. The American Medical Association released a report last month surveying the situation in 294 metropolitan areas. It found a “remarkable reduction in the number of competing health plans.” In 95% of cities, a single insurer had at least 30% of the market; in roughly half of these metropolitan areas, a single insurer had 50% or more of the market.
Mr. Shadegg’s remedy is straightforward: Just as Americans can bank out-of-state, they should be able to choose a non-local insurance policy. Thus, an insurer licensed in, say, Ohio could sell insurance here, governed by Ohio’s regulations. Such legislation is entirely consistent with the Commerce Clause of the Constitution.
But he faces stiff opposition. Speaking at a congressional hearing last year, Rep. Frank Pallone, a Democrat of New Jersey, spoke passionately in defense of New Jersey’s regulations. “Thanks to these consumer protections, New Jersey is able to ensure that its residents have access to quality individual insurance products,” he said.
But Mr. Pallone misses the point. New Jersey policies aren’t better than those of, say, neighboring Pennsylvania; they are just more regulated. Moreover, under the system Mr. Shadegg proposes, nothing would force a person to “shop” out of state. If a New Jersey resident wanted a New Jersey policy – regulations and all – he could purchase one. Mr. Shadegg’s bill would simply give him the option of looking beyond state lines.
There is more than a little irony in congressmen fretting over the loss of state regulations. After all, members of Congress and their families are covered by the Federal Employees Health Benefits Plan – which isn’t bound by state regulations. Mr. Shadegg’s bill would, in a sense, level the playing field between congressmen and the rest of us mere mortals.
Mr. Shadegg now has 71 co-sponsors in the House of Representatives to amend the Public Service Health Act, allowing out-of-state health insurance. He lacks critical support, though, from the New York and New Jersey delegations. Shouldn’t they favor choice and competition in health care?
Dr. Gratzer, a physician, is a senior fellow at the Manhattan Institute.