NCPA - National Center for Policy Analysis


August 18, 2006

The Health Care Choice Act, sponsored by Sen. Jim DeMint (R-S.C.), and Rep. John Shadegg (R-Ariz.), would increase access to individual health coverage by allowing insurers licensed to sell policies in one state to sell policies in any other state, says Devon Herrick, a senior fellow with the National Center for Policy Analysis.

Legislation is needed because state markets are simply not competitive, says Herrick. With each state insurance market protected from interstate competition, legislators are able to mandate that insurers cover services that drive up premiums. For example:

  • A 25-year-old man living in Kentucky could get an individual insurance policy for $960 per year.
  • That same man, were he a resident of New Jersey, could expect to pay $5,880 per year for similar coverage.
  • Kansas would price the policy at $1,548
  • New York State would rate it at $5,172.

And if legislating coverage weren't enough, explains Herrick, many states also require guaranteed issue and community rating:

  • Guaranteed issue means any insurance company offering policies must sell coverage to all applicants who qualify, regardless of medical condition.
  • Community rating means an insurer cannot adjust its premiums to reflect the individual health risk of consumers.

Both of these regulations drive up the cost of health coverage and result in healthy people dropping their insurance. Subsequently, business dwindles, insurers leave the market and rates go up as competition diminishes.

The Health Care Choice Act would cure this by allowing consumers to shop for individual insurance on the Internet, by phone or through a local agent, says Herrick. 

And residents of any state would be free to choose among policies from any insurer that offers them.

Source: Devon Herrick, "Inject competition into health care," Baltimore Sun, August 17, 2006


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