NCPA - National Center for Policy Analysis


April 19, 2006

By long-established practice and explicit federal law (the McCarran-Ferguson Act of 1945), most insurance regulation is left to state governments. That includes health insurance, which states oversee with widely varying results for the consumer, says Investor's Business Daily (IBD).

State-to-state differences in premiums can be dramatic, especially in the market for individual coverage. A survey last year by the online insurance marketplace eHealthInsurance compared the price for similar policies in 50 cities and found a roughly sixfold difference between the cheapest and most expensive:

  • A policy for a single 30-year-old, nonsmoker that cost $54 a month in Long Beach, Calif., went for $334.09 in New York City.
  • Meanwhile, Boston, with a monthly premium of $267.50, was second only to New York.
  • That will be a problem for Massachusetts' new mandatory coverage plan unless premiums fall to more affordable levels.

Regulation is only one of many factors that determine the cost of insurance. Premiums are also set by local medical costs, claims records, the risk profile of a given insured population and the financial condition of insurers, among other things, says IBD. They add to insurers' costs by adding mandated coverage for specified services, illnesses or types of practitioners, such as acupuncturists and chiropractors.

According to IBD, it's time to treat the marketing of health coverage as interstate commerce -- which it truly is, in the Internet Age -- and allow policy sales across state lines. Rep. John Shadegg, (R-Ariz.), has introduced a bill to that effect (the "Health Care Choice Act," H.R. 2355).

Source: Editorial, "Free the Market," Investor's Business Daily, April 19, 2006.


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