NCPA - National Center for Policy Analysis


October 22, 2009

If you live in New York State and don't have health insurance but earn too much money to qualify for subsidized state insurance, you can always reduce your costs sharply by moving to Connecticut.  There, you'll pay $7,750 a year for a family policy that would cost you $12,250 in New York State.  If you are in the same boat in New Jersey, you can decamp next door to Pennsylvania and reduce your insurance bite from nearly $10,500 a year for family coverage to $6,500.  Or, if you prefer a bare-bones high deductible policy, you can pay a mere $800 a year in Pennsylvania for your family coverage, says Steven Malanga, an editor for RealClearMarkets and a senior fellow at the Manhattan Institute.

All of this talk of health reform in Washington has created the illusion that we have a single health care system in America with prices that are roughly similar once adjusted for local costs of living.  But in fact we have 50 different health care systems, explains Malanga.  Our states, through their insurance commissioners and legislatures, exercise enormous influence over the shape of health insurance by mandating to residents and businesses what kind of coverage they must have, and to insurance companies what kind of illnesses and therapies they must cover.

The result is sharply different rates across the country:

  • In a study, the trade group for the nation's insurers, America's Health Insurance Plans, estimated that the average premium for family coverage in the individual market nationally was $5,800.
  • But the study found wide disparities in costs, ranging from average premiums north of $12,000 in New York and Massachusetts to premiums costing on average only $3,000 to $5,000 in more than a dozen states.
  • Some states have even allowed insurers to introduce low-cost, high-deductible policies that can cost under $1,000 a year.

It's fair to say that the costs imposed by some states based on how they regulate health insurance are now a bigger burden on individuals and small and mid-sized firms than state and local taxes, says Malanga:

  • New Jersey's per capita state and local tax burden, for instance, is $1,322 a year higher than Pennsylvania's, according to the Tax Foundation.
  • But an individual buying health insurance for himself in Jersey must pay $1,377 more, on average, than in Pennsylvania for a policy.

Source: Steven Malanga, "To Cut Your Health Insurance Costs, Move," RealClearMarkets, October 21, 2009.

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