There were some things that I liked about President Obama’s speech on health care last night. Although he made a veiled attack on Sarah Palin, he was trying at least to appear bipartisan, for he praised Senator John McCain and expressed openness to tort reform, a Republican solution to rising health care costs.
I wish he were open to another Republican idea, however: allowing consumers to shop for health insurance across state lines. I heard John McCain talk about this during the 2008 campaign, but I didn’t really understand this issue before I saw David Frum on Bill Moyers’ Journal and read Ann Coulter’s series on health care.
Right now, consumers cannot shop for health insurance across state lines, and the result is that most states have one or two health insurance companies that hold a monopoly over the market. Many of us know that monopolies aren’t good, for the absence of competition allows corporations to get away with whatever they want. And, if you’re dissatisfied, too bad! You can’t take your business elsewhere!
My understanding is that politicians and government officials in Washington are able to shop across state lines. At least that’s what I’ve heard! They’re given a wide array of options in terms of health insurance packages.
President Obama last night demonstrated his awareness of some of these issues, as he emphasized the importance of competition. Here are his words:
“Now, if you’re one of the tens of millions of Americans who don’t currently have health insurance, the second part of this plan will finally offer you quality, affordable choices. If you lose your job or change your job, you will be able to get coverage. If you strike out on your own and start a small business, you will be able to get coverage. We will do this by creating a new insurance exchange –- a marketplace where individuals and small businesses will be able to shop for health insurance at competitive prices. Insurance companies will have an incentive to participate in this exchange because it lets them compete for millions of new customers. As one big group, these customers will have greater leverage to bargain with the insurance companies for better prices and quality coverage. This is how large companies and government employees get affordable insurance. It’s how everyone in this Congress gets affordable insurance. And it’s time to give every American the same opportunity that we’ve given ourselves…
“So let me set the record straight. My guiding principle is, and always has been, that consumers do better when there is choice and competition. Unfortunately, in 34 states, 75% of the insurance market is controlled by five or fewer companies. In Alabama, almost 90% is controlled by just one company. Without competition, the price of insurance goes up and the quality goes down. And it makes it easier for insurance companies to treat their customers badly – by cherry-picking the healthiest individuals and trying to drop the sickest; by overcharging small businesses who have no leverage; and by jacking up rates.”
The President acknowledges the importance of competition in keeping prices low and quality high. He knows that there are health insurance monopolies in most states. He wants Americans to have access to a broad array of choices, just like people in Congress have. So why’s he against allowing Americans to shop for health insurance across state lines?
In the second 2008 Presidential debate, he explained why:
“And the reason that it’s a problem to go shopping state by state, you know what insurance companies will do? They will find a state — maybe Arizona, maybe another state — where there are no requirements for you to get cancer screenings, where there are no requirements for you to have to get pre-existing conditions, and they will all set up shop there. That’s how in banking it works. Everybody goes to Delaware, because they’ve got very — pretty loose laws when it comes to things like credit cards. And in that situation, what happens is, is that the protections you have, the consumer protections that you need, you’re not going to have available to you.”
Candidate Obama said he was against shopping across state lines because that would encourage health insurance companies to go to states with loose requirements, the ones that don’t require health insurance companies to cover much. That’s probably why Tom Daschle called the idea “a race to the bottom.”
But does it have to be this way? For one, wouldn’t health insurance companies compete to offer quality to encourage consumers to buy their health insurance? And, second, David Frum on Bill Moyers’ Journal proposed that regulations for health insurance companies be national rather than state-by-state. I know this doesn’t sound very Republican, since Republicans love states’ rights! But wouldn’t that solve the problem of health insurance companies going to a state with lax regulations, since the regulations would be national?
I don’t think that shopping across state lines is the only thing we should do to fix health care, but it is a step in the right direction. And, if President Obama is truly interesting in reaching across party lines and using the solutions of both Republicans and Democrats, then he should give it a fair hearing.