NCPA - National Center for Policy Analysis

HOW TO CREATE A COMPETITIVE INSURANCE MARKET

June 15, 2006

Rep. John Shadegg (R-Ariz.) has introduced the Health Care Choice Act (H.R. 2355), which would increase access to individual health coverage by allowing insurers licensed to sell policies in one state to offer them to residents of any other state. If enacted, the law would create a more competitive, nationwide health insurance market, says Devon M. Herrick, a senior fellow with the National Center for Policy Analysis.

Currently, the cost of individual health insurance varies widely from state to state. The Commonwealth Fund and e-HealthInsurance.com compared the prices of policies in seven states with varying degrees of regulation. The policies had similar coverage and a deductible of about $500.

  • A 25-year old male in good health could purchase a policy for $960 a year in Kentucky. That policy would cost about $5,880 in New Jersey.
  • A similar policy available in Kansas for about $1,548 costs $5,172 in New York State.
  • A policy priced at $1,692 in Iowa and $2,664 in Washington State would cost $4,032 in Massachusetts.

The difference in premiums is mainly due to state regulations rather than variation in health care costs, says Herrick.

The Health Care Choice Act would allow consumers to shop for individual insurance on the Internet, over the telephone or through a local agent. Residents of any state would be free to choose among policies from any insurer that offers them. The policies would be regulated by the insurer's home state. Thus, if consumers do not want expensive "Cadillac" health plans that pay for acupuncture, fertility treatments or hairpieces, they could buy from insurers in states that do not mandate such benefits. Consumers would be more likely to find a policy that fits their budget -- giving more people access to affordable insurance, says Herrick.

Source: Devon M. Herrick, "How to Create a Competitive Insurance Market," National Center for Policy Analysis, Brief Analysis No. 558, June 15, 2006.

For text:

http://www.ncpa.org/pub/ba558

 

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